Principal Growth Calculator

Formula

The formula to calculate the final principal is:

\[ FP = P \times (1 + r)^t \]

Where:

$FP$ is the final principal (\$)
$P$ is the initial principal (\$)
$r$ is the annual interest rate (expressed as a decimal)
$t$ is the time the money is invested or borrowed for (years)

What is Principal Growth?

Principal growth refers to the increase in the initial amount of money invested or borrowed due to the accumulation of interest over time. This concept is fundamental in finance and is used to understand how investments grow and how the cost of borrowing can increase over time. It is particularly important for long-term financial planning and investment strategies.

Example Calculation 1

Let's assume the following values:

Initial Principal (P) = $1,000
Annual Interest Rate (r) = 5%
Time (t) = 10 years

Using the formula:

\[ FP = 1000 \times (1 + 0.05)^{10} = 1000 \times 1.6289 = 1628.89 \, \$ \]

The Final Principal is $1628.89.

Example Calculation 2

Let's assume the following values:

Initial Principal (P) = $500
Annual Interest Rate (r) = 3%
Time (t) = 5 years

Using the formula:

\[ FP = 500 \times (1 + 0.03)^{5} = 500 \times 1.1593 = 579.65 \, \$ \]

The Final Principal is $579.65.