# What is financial calculator?

An electronic device to perform various calculations & solve common mathematic and calculation problems in the commerce & business field is referred to as a financial calculator. Interest & tax are the most widely used terms in the business and finance field. Here we will go through different types of tax & interest, their formulas and calculation via online calculators.

## What is Interest

The extra amount of money paid on a loan or the amount of money earned by you on your money deposits in different banks or investment organizations. Usually, interest is also called as APR (Annual Percentage Rate). It is the percentage charged for a year on the real loan amount and is termed as the interest rate. e.g if you have taken a 1000\$ loan for a year with an interest rate of 4% then you have to pay 4% of 1000\$ ( i.e   4/100  x  1000\$ = 40\$  ) 40\$ extra. Interest, as well as the interest rate, is of three types. Simple interest, compound interest and effective interest.

### Simple Interest

Simple interest is interest charged on the basic/principal amount of the loan, an investment or money deposit. The rate of interest charged on the basic amount only is called as simple interest rate. The formula to calculate simple interest is:

simple interest amount = principal amount × (interest rate / 12months/year) × n

where n is the number of months.

#### For example:

Simple interest on 1000\$ with an interest rate of 6% for 12 months will be

Simple interest =  1000\$ x ( 6% / 12months/year) × 12

= 1000\$ x  ( 0.06 /12months/year) × 12

= 60\$

This site has a simple interest calculator to calculate the simple interest amount. Just select currency, write the principal amount, interest rate & time duration and get an answer in a second with just a click.

### Compound Interest

Compound interest is charged on the principal amount as well as previously accumulated interest. The rate for this interest is called the compound interest rate. The formula for compound interest is

where   Ais the future amount after n years

Ais an initial amount

r  is the nominal interest rate

m  is compounding periods in a year

n  is equal to the number of years for loan/investment

#### For Example

Compounded amount of 10000\$, with an annual interest rate of 6%, for 8 months, compounded monthly, will be :

An = 10000\$ . ( 1 + 6% / 12)12x8  = 10,407.07\$

Here you can calculate compound interest with the online compound interest calculator offered on this site.

### Effective Interest

The interest rate that includes the principal amount, as well as the amount earned via compounded interest, is called the effective interest rate.

Effective Period Rate = Nominal Annual Rate / n

#### For Example

The effective period interest rate for the 4% nominal annual interest rate compounded monthly will be

Effective Period Rate =  4% / 12 = 0.333% per month.

## Tax

It is an amount charged by any government or other organization to the public or customers on purchasing different goods or using any service. This tax usually goes to the government fund which is spent on the public in different ways by the government. There is a huge variety of taxes but here we will discuss two mostly imposed types of tax and the calculation of these taxes.

### GST

Goods & Services Tax (GST) is an indirect imposed on buying goods or using/purchasing different services. The formula to calculate GST is :

GST = GST Rate(%) × initial amount

For example, if a company buys raw materials for a chair for 100\$ and sold the chair after processing & manufacturing it with 15% GST then the amount of GST tax imposed by the company will be:

GST amount = 15%  x  100 = 15\$

Hence the net amount of a chair will be 115\$.

This site offers an online calculator for the calculation of GST.

### VAT

Value Added Tax is a type of tax in which tax value is added to the initial amount on each step. The formula for this tax calculation is

VAT = VAT Rate(%) × initial amount

Online calculators for this tax and all above-mentioned tax and interests can be used by going to the home page >> Calculators >> Financial calculator.