Calculate compound interest accumulation on an initial investment plus annual and monthly contributions, accounting for tax on interest income and inflation.
Simple interest is charged only on the original principal, every period, in equal amounts. Compound interest is charged on the principal plus any interest already accumulated — meaning interest itself starts earning interest. Almost everything in the real world, from savings accounts to investment portfolios, uses compound interest.
The more often interest compounds within a year — monthly instead of annually, say — the faster a balance grows, because each compounding period's interest starts earning its own interest sooner. The difference is small in year one but widens the longer the money stays invested.
Interest income from things like savings accounts, CDs, and taxable bonds is often taxed as ordinary income. Applying a tax rate here shows the real, after-tax growth of the balance rather than the gross figure.
It discounts the ending balance by the assumed inflation rate, showing what that future balance would actually be worth in today's purchasing power — leave inflation at 0% to see the raw, unadjusted ending balance instead.
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