Compound and Simple Interest Calculation using Python

In this tutorial, we are going to write a Python program to calculate compound and simple interest using Python program. I hope you have also done the math related to interest when you were in high school.

Below is given a list that shows exactly what we will do:

• The user inputs the Principle Value.
• Then, the user inputs the rate of interest in percentage.
• In the third line, the user inputs the time interval.
• Then, the user must input the compounding frequency.
• The output shows the Future Value and the Interest paid.

The image below shows the formula for Compound Interest Calculation:

COMPOUND INTEREST CALCULATION

The below is of Simple Interest Calculation formula:

A = P(1 + rt)
Where A is the total amount
P is for principal amount
Interest amount is I here
r is known as rate of interest
t is the time period.

Special note: r is for the rate of interest in decimal and r= R/100 where R is the interest rate in percentage.

Why Compound Interest is Important?

• Let’s say that an investment is by you in an asset that returns, on average, 7% each year, and let’s say you invest Rs. 10,000 as Principle Value in the first year.
• One year later, you get Rs. 10,000 of your original investment, and Rs. 700 of growth.
• In the second year, you now have Rs.11,449 (Rs.10,700 + Rs.10,700 * 7%)
• Over 40 years, the growth is quite large: your Principal Value of Rs.10,000 investment is worth Rs.1,49,745!
• 1 year later, you barely find any difference between your original investment and the final value. But after 30 years, you had over 7 times your principal investment! That’s the power of compounding.
• Let’s take a look at the code snippet and its output.

How Simple Interest is different from Compound Interest?

• First, simple interest is the calculation of that interest which ignores the compounding effect.
• Second, simple interest doesn’t compound with each time period of a loan.
• Third, simple interest is advantageous for borrowers whereas compound interest is advantageous for lenders.

Python program to find out the compound and simple interest rate

PROGRAM:

P=int(input("Input Principle Value: "))
R=int(input("Input Rate of Interest: "))
T=int(input("The Time Interval for which investment is done: "))
n=int(input("The Compound Frequency:"))
R/=100
R=round(R,2)
F1=P*((1+R/n)**(n*T))
I1=F1-P
I1=round(I1,2)
F1=round(F1,2)
I2=P*R*T
F2=P+I2
print("In Compound Method:")
print("     Compound Interest:",I1)
print("     Future Value:",F1)
print("In Simple Method:")
print("     Simple Interest:",I2)
print("     Future Value:",F2)

OUTPUT 1:

Input Principle Value: 60000
Input Rate of Interest: 8
The Time Interval for which investment is done: 15
The Compound Frequency:2
In Compound Method:
     Compound Interest: 134603.85
     Future Value: 194603.85
In Simple Method:
     Simple Interest: 72000.0
     Future Value: 132000.0

OUTPUT 2:

Below is another output example with a different amount of investment:

Input Principle Value: 70000
Input Rate of Interest: 8.5
The Time Interval for which investment is done: 15
The Compound Frequency:2
In Compound Method:
     Compound Interest: 192172.27
     Future Value: 262172.27
In Simple Method:
     Simple Interest: 94500.0
     Future Value: 164500.0

Also Read:

• Duplicate Elements Removal of an Array or List using Python
• Clockwise & CounterClockwise Rotation of Matrix using NumPy in Python