Financial Report
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ROI(return on investment) is .
Annual ROI is .
Annual ROI is .
Leveraging the Simple Interest Calculator
- Principal - Initial capital invested, the foundation of your financial portfolio.
- Interest Rate - Annual percentage rate representing the return on your investment.
- Duration - The time span of your investment, typically measured in years.
- ROI - Return on Investment, the yield or profit from your investment relative to its cost.
Simplified Interest Computation Formula
Simple interest is computed by multiplying the principal, interest rate, and time period. Its formula stands as follows:
Simple interest = P * r * t
- P represents the principal.
- R denotes the annual interest rate.
- T signifies the duration in years.
Distinction Between Simple Interest and Compound Interest
In the realm of simple interest, only the principal generates earnings, irrespective of the investment's duration.
Conversely, compound interest not only accrues on the principal but also accumulates on the interest from preceding periods. It is the prevalent method utilized in various financial transactions such as credit cards, savings and checking accounts, and mortgage loans.
For instance, consider an investment of $10,000 at an annual interest rate of 8%, compounded annually over a decade. Compute both its simple and compound interests.
| Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| Annual simple interest | $800 | $800 | $800 | $800 | $800 | $800 | $800 | $800 | $800 | $800 |
| Annual compound interest | $800 | $864 | $933.12 | $1,007.77 | $1,088.39 | $1,175.46 | $1,269.50 | $1,371.06 | $1,480.75 | $1,599.20 |
| Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| Total simple interest | $800 | $1,600 | $2,400 | $3,200 | $4,000 | $4,800 | $5,600 | $6,400 | $7,200 | $8,000 |
| Total compound interest | $800 | $1,664 | $2,597.12 | $3,604.89 | $4,693.28 | $5,868.74 | $7,138.24 | $8,509.30 | $9,990.05 | $11,589.25 |