Interest Calculator
This is a fixed rate compound interest calculator for the interest and the end balance if save a fixed amount and/or saves periodically with tax and inflation considered. For periodically saving, you can choose to save at the beginning or at the end of each period. You can choose the type of compound interest if needed. To understand the difference, please check the compound interest calculator. The APR given by bank is normally interest rate compounded annually.
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Interest is a fee or compensation paid by borrower to the lender. By the way of accumulation, the interest rate can be categorized into simple interest and compound interest. Please check the compound interest calculator for the difference.
In economics, the interest or the nominal interest rate is composed of the inflation rate and the real interest rate. The average inflation rate in the United States in the past 30 years is around 4.3%. Please check the inflation calculator for more information. This means you must have an average interest/return rate of 4.3% to not lose the purchasing power of your money. The average annual return rate of S&P 500 index in the United States is around 7.5%. TIPS, or Treasury Inflation-Protected Securities, is a bond issued by the U.S. Treasury that provides protection against inflation.
In the real world, the interest rate of a loan or saving can be fixed or floating. The rates of floating rate loan or saving are normally based on some reference rate, such as the U.S. Federal Reserve (fed) funds rate or LIBOR (London Interbank Offered Rate). Normally the loan rate is a little higher and the saving rate is a little lower than the reference rate. The difference was the profit of the bank. Both the fed rate and LIBOR are short term inter-bank interest rate. Yet, the fed rate are the main tools that the Federal Reserve uses to influence the supply of money in the U.S. economy. LIBOR is a commercial rate calculated from prevailing interest rates between highly credit-worthy institutions. The following a diagram of fed rate from 1954 to 2009.
