Investment Calculator Calculate Amount Earned On Initial Investment

Investment Calculator

An investment calculator can calculate the amount, including the income earned on the initial amount invested in any investment plan or product offering compounding earnings.

About Investment Calculator

The formula for calculating Investment is as below:

Investment Calculator

I x ( 1 + r/F )nxF

I is the initial amount invested
r is the rate of interest
F is the frequency of interest being paid
n is the the number of periods for which investment shall be made.

For one-time investment

For monthly investment

Wherein,

M is the total amount at the end of the investment periodI is the initial amount investedi is the fixed amount invested at regular intervalsr is the rate of interestF is the frequency of interest is paidn is the number of periods for which investment shall be made.

Many investment products are available in the market, including mutual funds, fixed deposits, retirement schemes, company deposits, certificate of depositCertificate Of DepositA certificate of deposit (CD) is an investment instrument mostly issued by banks, requiring investors to lock in funds for a fixed term to earn high returns. CDs essentially require investors to set aside their savings and leave them untouched for a fixed period.read more, recurring deposits, etc. All these investment schemes have different kinds of payment systems. For example, in the case of a fixed deposit, the amount is invested initially, and then interest is accumulated and paid to the investor; there is another type of investment plan wherein the investor invests the amount at regular intervals, and then interest is earned on the same , which is a type of recurring fixed deposit. Mutual fundsMutual FundsA mutual fund is a professionally managed investment product in which a pool of money from a group of investors is invested across assets such as equities, bonds, etcread more also have both kinds of investment options. Therefore, if the investor wants to calculate what will be his maturity amount invested in any investment plan, this calculator will be useful for calculating the same.

How to Use Investment Calculator?

One needs to follow the below steps to calculate the Investment.

Step #1: Determine the initial amount which is supposed to be invested and whether it is invested for one time or after the initial amount; there will be an investment amount paid at regular intervals.

Step #2: Figure out the rate of interest that would be earned on the investment.

Step #3: Now, determine the period for which it shall be invested.

Step #4: Divide the rate of interest by the number of periods the interest or the investment income is paid. For example, if the rate paid is 12% and it pays quarterly, the interest rate would be 12%/4, which is 3.00%.

Step #5: Now use the formula discussed above in point 1) in case the investment is made lump sum and use formula 2) in case the investment amount is made at regular intervals.

Step #6: The resultant figure will be the maturity amount that would also include the investment income.

Example #1

Mr. A works in a nationalized bank and doesn’t like investing in capital marketsCapital MarketsA capital market is a place where buyers and sellers interact and trade financial securities such as debentures, stocks, debt instruments, bonds, and derivative instruments such as futures, options, swaps, and exchange-traded funds (ETFs). There are two kinds of markets: primary markets and secondary markets.read more. He has spent around 20 years of his life working in the bank’s operations department and has never looked to come out of it. Recently he received a bonus from Bank amounting to $18,000 as the lumpsum amount, and he didn’t have any fund requirement and hence decided to invest the lump sum amount in a fixed deposit scheme for ten years wherein the bank would pay him 6.9% per annum which will be compounded quarterlyCompounded QuarterlyThe compounding quarterly formula depicts the total interest an investor can earn on investment or financial product if the interest is payable quarterly and reinvested in the scheme. It considers the principal amount, quarterly compounded rate of interest and the number of periods for computation.read more. Based on the given information, you must calculate the amount he would receive at maturity.

Solution:

We are given the below details:

I = $18,000r = Rate of interest, which is 6.90%, and quarterly it would be 6.90% / 4, which is 1.73%F = Frequency which is quarterly here; hence it will be 4n = number of years the investment proposed to be made, which is ten years here.

Now, we can use the below formula to calculate the maturity amount.

= $18,000 * ( 1 + 6.90%/4 )10 * 4= $18,000 * ( 1.01725)40= $35,676.35

Compounded Interest Earned would be

= $35,676.35 – $18,000.00= $17,676.35

Example #2

Mr. Chandler graduated from New York University in finance, and he wanted to be self-dependent and didn’t want to join his family business. He decided to do a job, and then after a couple of years down the line, he would like to open up his office.

Since he doesn’t have any funds in hand, he decides to accumulate funds after 12 years and then quit the job and start his own business. He decides to keep aside $200 every month and would invest in a hybrid fund where on average, he can earn 7% if he invests for that long period. The estimated costEstimated CostCost estimate is the preliminary stage for any project, operation, or program in which a reasonable calculation of all project costs is performed and thus requires precise judgement, experience, and accuracy.read more for the same comes to around $45,000.

Based on the given information, you are required to determine whether Mr. Chandler’s goal will be met.

I = NA – there is no initial amount herei = Fixed amount that will be invested at regular intervals will be $200r = Rate of interest, which is 7.00%, and monthly it would be 7.00% / 12, which is 0.58%F = Frequency which is monthly here; hence it will be 12n = number of years the investment to be made, which is 12 years here.
= 0 x ( 1 + 0.58% )144 + $200 x [(1+0.58%)144 – 1 / 0.58%]= 0 x ( 1.0058)144 + 200 x 224.69= $44,939.00

Therefore, it can be seen that he would be successful in getting the desired funds after 45 years, provided the fund he has invested earns an average of 7% per annum.

Conclusion

This calculator, as discussed above, can be used to calculate the maturity amount and the investment incomeInvestment IncomeInvestment income is the earnings made from allocating funds in financial instruments or assets like securities, mutual funds, bonds, property, etc. It includes dividends on bonds and interest received on bank deposits, profits and capital gain from the sale of real estate and securities. read more that shall be earned. Both types of investment plan maturity amounts can be calculated whether the one-time lumpsum amount is invested in regular intervals.