How to Use Compound Interest Tables

Buy mutual funds

Compound interest tables are compilations of data that help you to see how much interest an investment will earn over a certain amount of time at a certain interest rate. There are many different applications for these. They are particularly helpful if you are looking to buy mutual funds or invest in long term, high interest savings accounts. The following steps will outline how to use compound interest tables as if you want to buy mutual funds, although it is applicable for other investments or loans as well.

Instructions

1. The first thing you must do is to find a table that presents similar data to what you are considering. For this example, we will look to buy mutual funds. Our investment will be $20 per week for one year.

2. The next step will be to check interest rates. We will suggest that you can get 6% if you are to buy mutual funds right now. Look to the column for percentages. Compound interest tables will probably offer several different percentages, although none will likely be exactly what you want. That is OK as you are simply analyzing the perceived value of the investment. If you need to know exact, you will need to learn how to calculate it manually.

3. The next thing to do is to decide how long you would like to invest the money for. If you want to buy mutual funds, you should know that you have to invest long term in order to turn a good profit, so for this example, we will plan to invest for 10 years.

4. Now that you have all your data, find the field in the compound interest tables which represents your total return on the investment. For purposes of the buy mutual funds example, the return at $20 per day over a ten year period would be $13,813.00. There is a link in the resources section to the table which was used for this example.

Tips & Warnings

• If you are comparing the actual value of the return on an investment, it is best to go to the bank and get official quotes on what the long term return is. The tables are more for general reference; to determine how you want to invest.

Resources

• Compound Interest Tables - Buy Mutual Funds Example