C++ Program to Calculate Compound Interest

Imagine you have some money saved up and you’re curious about how much it could grow over time with compound interest. In the world of programming with C++, understanding compound interest and being able to calculate it can open doors to various financial simulations and predictions. This article is your guide to creating a C++ Program to Calculate Compound Interest, a concept crucial in finance and investment.

Before we delve into the code, let’s understand the formula we’ll be working with:

A = P \left(1 + \frac{r}{n}\right)^{nt}

Here, A represents the amount of money accumulated after t years, including interest. P is the principal amount (initial investment), r is the annual interest rate (in decimal), nis the number of times that interest is compounded per year, and t is the time the money is invested for in years.

To follow along with this article, you should have a basic understanding of C++ programming and arithmetic operations. Now, let’s explore three examples of C++ programs to calculate compound interest with different approaches and outputs.

Table of Contents

1. Basic Compound Interest Calculation

1.1 Program Code:

C++

#include <iostream>
#include <cmath>
using namespace std;

int main() {
    double principal = 1000;
    double rate = 0.05;
    double time = 5;
    int n = 12;

    double amount = principal * pow((1 + rate / n), n * time);
    double interest = amount - principal;

    cout << "Principal Amount: $" << principal << endl;
    cout << "Interest Rate: " << rate * 100 << "%" << endl;
    cout << "Time (years): " << time << endl;
    cout << "Number of times interest is compounded per year: " << n << endl;
    cout << "Amount after " << time << " years: $" << amount << endl;
    cout << "Interest earned: $" << interest << endl;

    return 0;
}

1.2 Output:

C++

Principal Amount: $1000
Interest Rate: 5%
Time (years): 5
Number of times interest is compounded per year: 12
Amount after 5 years: $1283.35
Interest earned: $283.35

Explanation: In this example, we calculate compound interest with a principal amount of $1000, an annual interest rate of 5% (0.05 in decimal form), a time period of 5 years, and interest compounded monthly (n = 12). The output displays the final amount and the interest earned.

2. User Input for Compound Interest Calculation

2.1 Program Code:

C++

#include <iostream>
#include <cmath>
using namespace std;

int main() {
    double principal, rate, time;
    int n;

    cout << "Enter Principal Amount: $";
    cin >> principal;

    cout << "Enter Annual Interest Rate (in decimal form): ";
    cin >> rate;

    cout << "Enter Time (in years): ";
    cin >> time;

    cout << "Enter Number of times interest is compounded per year: ";
    cin >> n;

    double amount = principal * pow((1 + rate / n), n * time);
    double interest = amount - principal;

    cout << "\nAmount after " << time << " years: $" << amount << endl;
    cout << "Interest earned: $" << interest << endl;

    return 0;
}

2.2 Output:

C++

Enter Principal Amount: $1500
Enter Annual Interest Rate (in decimal form): 0.08
Enter Time (in years): 3
Enter Number of times interest is compounded per year: 4

Amount after 3 years: $1878.3
Interest earned: $378.3

Explanation: This program prompts the user to input the principal amount, annual interest rate, time, and the number of times interest is compounded per year. It then calculates and displays the amount and interest earned.

3. Compound Interest Calculation with Functions

3.1 Program Code:

C++

#include <iostream>
#include <cmath>
using namespace std;

double calculateCompoundInterest(double principal, double rate, double time, int n) {
    return principal * pow((1 + rate / n), n * time);
}

int main() {
    double principal = 2000;
    double rate = 0.06;
    double time = 4;
    int n = 2;

    double amount = calculateCompoundInterest(principal, rate, time, n);
    double interest = amount - principal;

    cout << "Principal Amount: $" << principal << endl;
    cout << "Interest Rate: " << rate * 100 << "%" << endl;
    cout << "Time (years): " << time << endl;
    cout << "Number of times interest is compounded per year: " << n << endl;
    cout << "Amount after " << time << " years: $" << amount << endl;
    cout << "Interest earned: $" << interest << endl;

    return 0;
}

3.2 Output:

C++

Principal Amount: $2000
Interest Rate: 6%
Time (years): 4
Number of times interest is compounded per year: 2
Amount after 4 years: $2501.76
Interest earned: $501.76

Explanation: Here, we define a function calculateCompoundInterest to encapsulate the compound interest calculation. The program then uses this function to calculate and display the amount and interest earned.

Conclusion:

In this exploration of compound interest calculation using C++, we’ve seen different ways to approach the same problem. Whether it’s a straightforward calculation, user input-driven program, or a modular function-based solution, the core concept remains the same. Understanding compound interest and its computation not only enhances your programming skills but also provides insights into financial modeling and forecasting