- Enter the starting balance (e.g., initial deposit);
- Enter the percentage of the starting balance (e.g., 1, 2, 3, etc.);
- Enter the number of months that you are planning to make savings (from 1 to infinity);
- Hit the calculate button!
A – is the final amount or the result of compounding you must have on your account balance;
P – principal or the starting balance;
r – annual interest rate;
n – number of times interest acquired per the period on time
t – the number of periods.
Assume that: you have a starting balance of 1 000 $, you would like to hold aside 1% every month over the period of one year. So, it means that P = 1000, r = 12%, n =12 (months), t=1;
1000(1+0.01)^12=1126.83 at the end of the 12th month the balance would be 1126.83 USD. Increasing your funds by 126.83$ compared to the initial balance.
Each month the balance is increased by 1% compared to the previous month. Which means, that at the end of 1st month the balance will be 1010 USD, at the end of the second month the result will be 1020.10 USD, and at the end of the 12th 1126.83 USD.
To explain it even better: 1000*1.01=1010, 1010*1.01=1020.10.
Compounding trading can seem complicated. But by using our Forex Compounding Calculator, you may easily navigate your way on the forex market.
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