Power of Compounding - Compound Interest Calculator

How often is interest compounded? The frequency of compounding may vary across banks. They usually calculate according to their own will. 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Pay4,000p.m.for15Years&get MaturityBenefit 13.5lakh @8%assumedrateofreturn OR 10.8lakh @4%assumedrateofreturn LifeCover 15lakh KnowMore FAQs Howoftenisinterestcompounded? Thefrequencyofcompoundingmayvaryacrossbanks.Theyusuallycalculateaccordingtotheirownwill.However,inpractice,onlyafewmethodsofcompoundingareused: Annualcompounding:Interestiscalculatedonceayear Half-yearlycompounding:Interestiscalculatedeverysixmonths Quarterlycompounding:Interestiscalculatedonceeverythreemonths Dailycompounding:Interestiscalculatedeveryday Whatdoescompoundinginterestmean? Compoundinginterestmeansinterestoninterest.Eachtimeyouearninterestonyourprincipal,itisaddedtotheoriginalamount,whichthenbecomestheprincipalforthenextcycle.Thisallowsexponentialgrowthforyourinterest.Compoundinginterestcanbegoodorbaddependingonwhetheryouareasaveroraborrower,respectively. Isitbettertocompounddailyormonthly? Althoughthedifferencewon’tbemuch,itisbettertooptfordailycompounding.Theinterestamountincaseofdailycompoundingwillbeslightlyhigherthantheotheroptions.Thisisgovernedbytheprinciple:theshorterthecompoundinginterval,thehighertheinterest. Howdoescompoundingpowerwork? Thepowerofcompoundingworksbygrowingyourwealthexponentially.Itaddstheprofitearnedbacktotheprincipalamountandthenreinveststheentiresumtoacceleratetheprofitearningprocess. Suppose,youinvest₹1000inabankwhichoffers10%interestperannum.Yourinvestmentbecomes₹1100afterthefirstyear,then₹1210after2ndyearandsoon. Howoftenisinterestcompounded? Thefrequencyofcompoundingmayvaryacrossbanks.Theyusuallycalculateaccordingtotheirownwill.However,inpractice,onlyafewmethodsofcompoundingareused: Annualcompounding:Interestiscalculatedonceayear Half-yearlycompounding:Interestiscalculatedeverysixmonths Quarterlycompounding:Interestiscalculatedonceeverythreemonths Dailycompounding:Interestiscalculatedeveryday Whatdoescompoundinginterestmean? Compoundinginterestmeansinterestoninterest.Eachtimeyouearninterestonyourprincipal,itisaddedtotheoriginalamount,whichthenbecomestheprincipalforthenextcycle.Thisallowsexponentialgrowthforyourinterest.Compoundinginterestcanbegoodorbaddependingonwhetheryouareasaveroraborrower,respectively. Isitbettertocompounddailyormonthly? Althoughthedifferencewon’tbemuch,itisbettertooptfordailycompounding.Theinterestamountincaseofdailycompoundingwillbeslightlyhigherthantheotheroptions.Thisisgovernedbytheprinciple:theshorterthecompoundinginterval,thehighertheinterest. Howdoescompoundingpowerwork? Thepowerofcompoundingworksbygrowingyourwealthexponentially.Itaddstheprofitearnedbacktotheprincipalamountandthenreinveststheentiresumtoacceleratetheprofitearningprocess. Suppose,youinvest₹1000inabankwhichoffers10%interestperannum.Yourinvestmentbecomes₹1100afterthefirstyear,then₹1210after2ndyearandsoon. Disclaimer   *Whiletheannualizedrateofreturnis%duringtheinvestmenttimeperiodof15years,theactualreturnsattheendofeachyearmaynotbelinear.Moreover,thereturnsareexpectedtofluctuateduringthepolicytenuredependingontheprevailingmarketconditions.Thiscalculationisgeneratedonthebasisoftheinformationprovidedandisforassistanceonly.Itisnotintendedtobeandmustnotalonebetakenasthebasisforaninvestmentdecision.   Calluson1-860-266-7766(10am-7pm,MondaytoSaturday,exceptnationalholidaysandvalidonlyforcallsmadefromIndia)andon91-22-6193-0777(ValidforcallsmadefromoutsideIndia)(10am-7pm(IST),MondaytoSaturday,exceptnationalholidays).Advt.No.:W/II/1460/2016-17