Compound interest refers to a situation where an investment grows at an exponential rate. As the interest earned on the bond is added to the original principal amount, it creates a larger base for earning and even more interest. With compound interest, the possibilities for wealth growth are quite vast, which is why it is widely used in many businesses nowadays. To approximately determine the return on any investment, it is quite essential to have access to a trustworthy compound interest calculator.
What is Compound Interest Calculator?
A compound interest calculator is a tool used for calculating the interest earned on a principal amount over a specific period, taking into account the compounding effect of reinvesting the interest earned.
Using a compound interest (CI) calculator one can benefit in the following ways:
- A compound interest calculator helps them determine the amount of interest earned over a specific period and the total return on their investment.
- Allows for calculation of expected investment growth by inputting only the interest rate, principal amount, and time.
- Calculates both; overall and annual returns and is also useful for future financial planning.
How Does CI Calculator Work?
Our Fixed Deposit calculator takes these main factors into account:
- Compound interest represented by A
- The principal amount represented by P
- Rate of interest given by r
- Number of times interest
- compounds in a year represented by n
- Number of years given by t
The compound interest (CI) is calculated using the following formula:
- A = Px(1 + r/n) ^ nt
Calculating these amounts is the difficult reason why one needs a compound interest calculator to make the task easier.
Mutual funds charge specific fees for managing anyone’s investments as a company. This charge is referred to as a load charge.
Exit load in a mutual fund
An exit load is a penalty charged to the investor when retrieving or exiting an investment. The absolute aim of levying an exit load is to discourage investors from taking away their funds from an investment before the lock-in period.
A mutual fund manager determines an average investment term suitable for their risk tolerance based on the return they wish to receive. Therefore, if someone withdraws their funds before that period, the equation of risk-return changes for other existing investors who are investing.
Exit load calculation
The exit fee is mainly charged as a percentage of the Net Asset Value (NAV) at the time of redemption of these mutual fund units. NAV is calculated as the net value of all assets minus the liabilities available in the company.
The following is the formula required:
Calculate the units purchased
Number of Units bought in one month = Total NAV/Number of Units bought
For redemption in the later month = the exit load would be charged for both investments in both those months as per the prevailing NAV.
Exit Load = The existing percentage on the NAV of both months.
The amount credited to the investor = Total NAV – Exit fee
The purpose of exit load on mutual funds is to discourage early redemptions to protect the interests of the investor. When investing in a mutual fund, one should always check the mutual fund exit load or mutual fund fees. If someone reads the information documents, they will be able to understand exit loads, which will help them make wise decisions.