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Calculate continuously compounded interest | Free template

Calculate continuously compounded interest is a free template to calculate what an initial investment and periodic investments gives for future value after a chosen number of periods when the compound interest effect has been taken into account.

Periodic savings can represent monthly savings where you put a certain amount of salary each month into a fund. This monthly savings gives that your equity and your wealth is growing continuously every month with what you save and with the compound interest effect. The compound interest rate effect means that you get interest rate or return also on the interest rate or yield obtained provided that such return is reinvested. The compound interest rate effect is larger the more times return is capitalized over a given period of time.

The impact of the compound interest rate effect is limited by the fact that you must pay capital tax on capital income at certain times during your investment horizon. If you save in a regular bank account, you must pay tax on received interest at the end of each calendar year, the banks provide statements of interest that you have received and the interest income is then stated in your declaration. If you save in funds, you do not pay tax until the year when you sell the funds. Remember that the fewer times you have to pay tax on capital income during the period the higher your total income after tax will be all other things being equal.

It is fiscally more advantageous to save in shares or funds, compared with ordinary bank savings in a bank account because you can withhold the tax on mutual fund and stock savings until you sell those assets.

Using this model to calculate continuously compounded interest, you can calculate how much your initial investment and periodic savings has grown after a certain number of periods with a given interest rate or rate of growth that you have selected. If you invest the $1000 at the beginning and then $200 per year in mutual funds you will have approximately $11 942 after 30 years when the average interest rate is 3% per year and no tax is taken into account.
Updated: 01-01-2015 | Created by

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