How many years will it take $500 to grow to $750 with an annual interest rate of 6 percent?

Definitions

Value of initial investment

Enter the amount of money you are investing.

Start Year

Enter the year in which the money was first invested.

End Year

Enter the future year on which you want to base your calculation.

Annual interest rate

Annual rate of inflation

Enter a projected annual rate of inflation. The default value (2.0%) equals the mid-point of the Bank's inflation-control target range. You may change this to any rate you wish.

Effect of inflation on value of initial investment

The value of the initial investment after the effects of inflation have been calculated, but excluding interest.

Total interest earned

The total amount of interest earned, before inflation.

Interest earned, after inflation

The total amount of interest earned, after the effects of inflation have been calculated.

Total future value

The total value of the investment after the effects of inflation on the principal and interest have been calculated.

Target future value of investment

Enter the future amount of money you want to have.

Current investment needed for future value

This displays the amount you would have to invest to achieve your future target, taking into account the effects of inflation.

The compound interest calculator helps you work out:

• what money you'll have if you save a regular amount
• how compounding increases your savings interest
• the difference between saving now and saving later
• how to calculate compound interest

Disclaimers

• A model not a prediction. Results are only estimates, the actual amounts may be higher or lower. We cannot predict things that will affect your decision, such as changing interest rates.
• This calculator is not intended to be your sole source of information when making a financial decision. Consider whether to get advice from a licensed financial adviser.

Assumptions

• Initial deposit is made today.
• Regular deposits are made at the end of year, month, fortnight, week, or day (according to the deposit frequency you set).
• Interest is credited either monthly or annually, in line with standard industry practice.
• The delayed start comparison feature will have the same regular deposit frequency.

FAQs - frequently asked questions

Q. How does compound interest work?

A. See compound interest to find out more.

Q. Are the results of the compound interest calculator shown in today's dollars?

A. The results of this calculator are shown in future dollars. No adjustment has been made for inflation.

Q: Why have you changed the calculator?

A: We upgrade our calculators regularly due to technological advances, regulatory changes and customer feedback. Once a calculator has been upgraded, the old version is no longer available.

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Compound Interest means that you earn "interest on your interest", while Simple Interest means that you don't - your interest payments stay constant, at a fixed percentage of the original principal. First, a calculator to let you see the difference.

The lesson is that compound interest is a better investment, which seems both obvious and moot - after all, bank accounts always pay compound interest anyway. Even a bond investment is really compound interest if you think about it: you get fixed coupons (that's simple interest) but you can invest them to get interest on them (ergo compound interest).

The situation where simple interest occurs naturally is when the principal doesn't change over time. This is true with an interest-only mortgage, for example, where your monthly payments only pay the interest on your loan, but don't pay down the loan itself.

Simple Interest Formula

Lets say that P is your starting principal (spelled -pal and not -ple, because Your Money is Your Pal), r is the interest rate (expressed as a decimal), and Y is the number of years you invest. Then your future value will be:

Note the two formulas give the same answer for one year. After that, compound interest takes off.