Compound Interest Tables
Compound Interest Tables. Using tables to calculate compound interest was especially important in the past, when there were no compound interest calculators widely available and everything had to be done by hand. A table lists the values for a fixed number of periods for the most common interest rates.
Make use of this table to quicken your compound interest calculations:
Compound Interest Table
|Year||Value at Start||Interest||Value at End|
Notice that by the end of Year 10, our initial investment of $100 has already more than doubled to become $259.39. In fact, this investment had almost doubled by the end of Year 7. This is a mathematical pattern that investors call the ‘Rule of 72’.
Simple vs Compound Interest
Simple interest and compound interest – what is the difference? Simple and compound interest are drastically different: simple interest means the interest is only computed once – you do not earn any interest on interest. If you were to invest $100 at a simple interest of 10%, it would simply become $110 at the end of 10 years – the interest is only calculated once.
Compound interest refers to you earning interest on interest – that is why your money increases at an accelerating rate, as the interest you earn adds to the rate of money accumulation.
Rule of 72
What is the Rule of 72? According to this rule, an initial investment at an annual return of 10% will double in 7.2 years. That is the exact point where our initial $100 will become $200.
Does the Rule of 72 work for other numbers?
Most magically, yes! Suppose you are interested in an interest rate of 6% per annum – how long would your money take to double? Simply divide 72 by 6 to get 12. Your money will take approximately 12 years to double. Check this compound interest calculation yourself using the compound interest formula – the rule of 72 is amazingly accurate!
Power of Compound Interest
Einstein once noted that the power of compound interest is the most powerful force in the Universe. Look at the increasing rate at which the money is increasing in the compound interest table – that is the magic of compound interest.