The SIP (Systematic Investment Plan) calculator is typically based on compound interest formulas to calculate the future value of investments made at regular intervals with a fixed rate of return.
SIP encourages regular investments, instilling discipline in your financial habits.
Future Value of SIP (FV):
The future value of SIP represents the total amount accumulated at the end of the investment period. It’s calculated using the formula for compound interest.
FV=P×(r(1+r)n−1)×(1+r)
FV = Future Value of SIP
P = Monthly investment amount
r = Monthly interest rate (annual interest rate / 12 months)
n = Total number of periods (investment tenure in years * 12)
Monthly Interest Rate (r):
The monthly interest rate is derived from the annual interest rate.
r=Annual Rate/(12*100)
r = Monthly interest rate
Annual Rate = Annual interest rate
Total Investment Amount (A):
The total investment amount is simply the monthly investment amount multiplied by the total number of periods.
A=P×n
A = Total Investment Amount
P = Monthly investment amount
n = Total number of periods (investment tenure in years * 12)
