Enter the principal amount, annual interest rate, and collection period into the calculator to determine the total collection amount. This calculator helps in understanding the future value of a debt or investment with compound interest.
Total Collection Formula
The following formula is used to calculate the total collection amount.
TC = P * (1 + r)^n
Variables:
- TC is the total collection amount ($)
- P is the principal amount ($)
- r is the annual interest rate (expressed as a decimal)
- n is the collection period (years)
To calculate the total collection amount, multiply the principal amount by one plus the annual interest rate raised to the power of the collection period.
What is Total Collection?
Total collection refers to the sum of money that is collected over a period of time, including the principal amount and the interest accrued. It is often used in the context of debt collection or investments to determine the future value of money considering compound interest. This calculation is crucial for financial planning and assessing the profitability of loans or investments.
How to Calculate Total Collection?
The following steps outline how to calculate the Total Collection.
- First, determine the principal amount (P) in dollars.
- Next, determine the annual interest rate (r) as a percentage and convert it to a decimal.
- Next, determine the collection period (n) in years.
- Next, gather the formula from above = TC = P * (1 + r)^n.
- Finally, calculate the Total Collection (TC) in dollars.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Principal Amount (P) = $1000
Annual Interest Rate (r) = 5%
Collection Period (n) = 3 years