What does compound interest calculate?
Compound interest adds interest to the capital used for the next period. Simple interest uses the principal without adding that interest to the calculation base.
Source: Finanzas para Todos: simple and compound interest · Checked on .
How is the effective annual rate applied?
The equivalent monthly rate is (1 + annual rate) raised to 1/12, minus 1, with rates expressed as decimals. An effective annual rate of 5% is approximately 0.4074% per month; it is not divided by twelve.
Enter an effective annual assumption, not a nominal rate or a commercial annual rate including costs.
When are monthly deposits added?
Each month, growth is calculated on the balance before the deposit is added. The final deposit earns no interest within that month. The monthly deposit and rate remain constant.
How should you read the worked example?
With €1,000.00 initially, €100.00 at each month end, a 5% effective annual rate and ten years, final capital is €17,065.21: €13,000.00 contributed and €4,065.21 in calculated growth.
| Year | Final capital | Contributed | Interest |
|---|---|---|---|
| 0 | €1,000.00 | €1,000.00 | €0.00 |
| 1 | €2,277.26 | €2,200.00 | €77.26 |
| 2 | €3,618.38 | €3,400.00 | €218.38 |
| 3 | €5,026.56 | €4,600.00 | €426.56 |
| 4 | €6,505.14 | €5,800.00 | €705.14 |
| 5 | €8,057.66 | €7,000.00 | €1,057.66 |
| 6 | €9,687.80 | €8,200.00 | €1,487.80 |
| 7 | €11,399.44 | €9,400.00 | €1,999.44 |
| 8 | €13,196.67 | €10,600.00 | €2,596.67 |
| 9 | €15,083.76 | €11,800.00 | €3,283.76 |
| 10 | €17,065.21 | €13,000.00 | €4,065.21 |
The yearly table separates contributions and growth. Year zero contains only the initial capital. Displayed growth is displayed final capital minus contributions, using two decimal places.
What does this simulation leave out?
Inflation, taxes and fees are not deducted. Losses, changing rates and withdrawals are not simulated. Final capital describes future euros under these assumptions, not purchasing power or the net proceeds of a product.
Accepts annual rates from 0% to 20%, whole periods of 0 to 50 years, and initial amounts and monthly deposits from €0 to €1,000,000. These are input limits, not investment recommendations.
Which mistakes change the result?
When comparing calculators, check the rate definition and when deposits are added. Always distinguish final capital from growth: part of the balance is money you contributed yourself.
Questions about the simulation
Cases that can change how you interpret the result.
- What happens with a 0% annual rate?
- Without growth, final capital equals contributions: €1,000.00 initially and €100.00 monthly over ten years total €13,000.00.
- What happens if the period is zero years?
- The result contains only the initial capital. No monthly deposits are added and calculated growth is €0.00.
- Can you simulate a negative return?
- No. Supported rates range from 0% to 20% annually. This model limit does not mean a real investment cannot lose value.
Which concepts help explain the result?
Choose the calculation or resource that fits your next step.
Would you like to record contributions and expenses?
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