Enter the principal amount, annual interest rate, number of times interest is compounded per year, and the time the money is invested for into the calculator to determine the amount of money accumulated after n years, including interest.
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Term Share Formula
The following formula is used to calculate the term share.
A = P * (1 + r/n)^{(nt)}Variables:
- A is the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (in decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested for in years.
To calculate the term share or CD interest, add 1 to the annual interest rate divided by the number of times interest is compounded per year. Raise the result to the power of the product of the number of times that interest is compounded per year and the time the money is invested for in years. Multiply this result by the principal amount.
What is a Term Share?
A Term Share is a type of savings account offered by credit unions, similar to a certificate of deposit (CD) offered by banks. It is a fixed-term investment where the investor deposits a certain amount of money for a specified period of time and earns interest. The interest rates for term shares are typically higher than regular savings accounts. However, withdrawing funds before the end of the term may result in penalties.
How to Calculate Term Share?
The following steps outline how to calculate the Term Share using the given formula:
- First, determine the principal amount (P).
- Next, determine the annual interest rate (r) in decimal form.
- Next, determine the number of times interest is compounded per year (n).
- Next, determine the time the money is invested for in years (t).
- Next, substitute the values of P, r, n, and t into the formula: A = P * (1 + r/n)^(nt).
- Finally, calculate the Term Share (A).
- After inserting the variables and calculating the result, check your answer with a calculator.
Example Problem:
Use the following variables as an example problem to test your knowledge:
Principal amount (P) = $5000
Annual interest rate (r) = 0.05
Number of times interest is compounded per year (n) = 4
Time the money is invested for in years (t) = 3
