Compound Interest Formula With Monthly Deposits Computing Guide

The truth is monetary organizations like banks compute for the interest using compound interest formula every day and not use compound interest formula with monthly deposits and interest as what most of know how to do. And that is one big plus to every money investor out there as they get more money added to their invested amount everyday talking about making your money do the work for you! And since, computing for your daily interest would take too much time and online calculators are used only as prediction tools, we will only discuss about compound interest formula with monthly deposits and interest.
However, if you want, you can search through the internet for calculators or spreadsheets in MS Excel that can help you calculate for your daily interest.

What is the Compound Interest Formula with monthly deposits?

The compound interest formula with monthly deposits and interest is P1=P(1 + m)^12.

P1: the accumulated amount with the additional monthly interest

P: the amount invested in the bank

m: interest rate of the invested amount monthly

Computing With The Compound Interest Formula With Monthly Deposits

The first thing you need to know on computing with the compound interest formula with monthly deposits and interest is the interest rate of your investment. This should be your interest rate per month and not by year. After getting the interest rate, we need to divide it to 12 as it is the number of months in a year. and since we are using the compound interest formula with monthly deposits as well. To make it clearer, heres an example. If my interest rate per month is 5% and i divide it by 12 then the rounded off answer is 0.42%. Now, if you want to know your daily interest rate then you need to divide the 5% or yearly rate by 365 days since it is the number of days per year. Now thats a whole lot of numbers compared to computing with compound interest formula with monthly deposits only.

Next step in computing with the compound interest formula with monthly deposits and interest is to multiply P or the amount invested by the result of the yearly interest rate divided by 12. After this, you need to add the answer to P or the amount invested. Here is an example: if I invested $500 and I have a .42% of monthly interest rate then my new P with the added result is $502.1. So how did I get the answer? $500 multiplied by .42 is 210 but since it is in the percentage form, we have to move the decimal point two places to the left. The result would be 2.10 then we need to add this to the invested amount which is $500. Therefore, getting the new principal amount of $502.1.

This is how simple it is to compute with the compound interest formula with monthly deposits and interest!