Enter the principal amount, the annual interest rate, and the time in years into the calculator to determine the future value of an investment.
Interest Increase Formula
The following formula is used to calculate the future value of an investment with compound interest.
FV = P * (1 + r)^t
Variables:
- FV is the future value of the investment ($)
- P is the principal amount ($)
- r is the annual interest rate (expressed as a decimal)
- t is the time in years
To calculate the future value of an investment, multiply the principal amount by the growth factor, which is one plus the annual interest rate raised to the power of the number of years.
What is Interest Increase?
Interest increase refers to the growth of an investment due to the application of interest over time. This growth is typically calculated using compound interest, where the interest earned each period is added to the principal, so that the balance doesn’t merely grow, it grows at an increasing rate. This is one of the most fundamental concepts in finance, particularly when it comes to savings and investing.
How to Calculate Interest Increase?
The following steps outline how to calculate the future value of an investment with compound interest.
- First, determine the principal amount (P) which is the initial amount of money invested or loaned.
- Next, determine the annual interest rate (r) and convert it to a decimal by dividing by 100.
- Next, determine the time in years (t) over which the money is invested or borrowed.
- Next, gather the formula from above = FV = P * (1 + r)^t.
- Finally, calculate the future value (FV) of the investment.
- 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) = $1,000
Annual Interest Rate (r) = 5%
Time (t) = 10 years
