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HomeMoneyTop 3 Uses for a Financial Calculator

Top 3 Uses for a Financial Calculator

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Introduction

Early humans counted using their fingers and toes. They then started carving tally marks into cave walls, trees, stones or bones. Each spot counted as one, and every fifth mark was scored through to the track. After a while, they realised that counting large numbers using tally marks was a mammoth task and came up with different ways of writing down numbers.

Our ancestors then tried to create a counting device for large numbers. Thus, the Abacus was born. Abacus, the first tool created for mathematical computation, was invented around 2500B.C. After this, almost 5000 years later, the first handheld calculator was developed. This machine called the “Cal-Tech” featured a small keyboard with 18 keys and could display up to 12 decimal digits.

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Financial calculators:

With technological advancement, the simple calculator that was just used for basic calculations can now perform complex calculations instantly. There are also several types of calculators like scientific, standard, graphing and programmer. From students who need calculators for their college courses to professionals who use calculators for their jobs, there are calculators for every need.

Financial calculators

A financial calculator can be used for calculating financial functions. These financial functions are not offered in a regular calculator. From figuring simple interests to finding out the future value of your investments, an online calculator can provide you with answers in a second. These calculators can be bought and used, but to avoid making huge investments in buying a financial calculator, ICICI directly offers a free online personal calculator that will help you calculate and evaluate your financial borrowings, investments, banking, or saving decisions. An online calculator reduces the need to carry a physical calculator with you and is also simple and easy to operate. It only requires an internet connection. You can even access it on your mobile phone or laptop at any place and at any time.

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Let us now look at the top 3 uses for a financial calculator:

To calculate the future value of your investments:

If you are an investor, one of the main concerns and questions you would have is about the future value of your investments. When you make an investment, you want to make sure they grow. You need to know that the investment you make today, given a specified rate of return, will be worth more in a few years. This value will help you decide if the risks associated with the investment will be worth the returns and help you make a financial decision. The value that is calculated is called the future value of your investments. Assume you invest ₹1000 today; given a 10% interest rate, you would want to know how much it would be worth in 5 years. This is simple to calculate using the future value calculator. There are three steps in finding this amount.

Step 1: Enter the initial amount (in ₹). This is ₹1000.

Step 2: Enter the rate of interest (in%). This is 10%

And then finally enter the time period (in years) which would be five years.

As soon as you enter all three values, you can see the answer below: your future value will be ₹1,611, and the total interest will be ₹611. Based on these values, you can decide if you want to invest.

To calculate the equated monthly instalments (EMI) on personal loans:

One of the main difficulties in taking out a loan is paying the EMIs on time. Most borrowers do not understand how interest rates work and get conned into paying higher instalments. There are personal loan EMI calculators to let them know how much EMI they need to pay their lenders, given a specific interest rate. Assume you want to borrow 10,00,000 at an interest rate of 5% and for a term of 10 years; with the help of the EMI calculator, you can get the answer you need in an instant.

Step 1: Enter the loan amount =₹10,00,000

Step 2: Enter the interest rate =5%

Step 3: Enter the loan term (years) = 10 years

With the help of the calculator, you can now see that for the values mentioned above, you will have to pay a monthly EMI of ₹10,607, and you need to pay the total interest of ₹2,72,786. The total amount that includes your loan and interest will be ₹12,72,786. Based on the above, you can decide if you want to take a personal loan.

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To calculate and compound interest:

 When you invest, you need to know how your money can grow. With the help of compound interest, you can understand how your money will multiply. Compound interest is when you use accumulated interest along with the principal interest to calculate the following interest. While there is a mathematical formula to calculate the interest, sometimes the calculation for compound interest might get difficult to do by hand. The online compound interest calculator will provide you with answers in seconds.

Assume you want to find out to see how much a ₹10,455 investment will grow in 3 years at a rate of 10% using the online calculator. You need to follow the below steps:

Step 1: Enter the principal amount in ₹          =  10,000

Step 2: Enter the rate of interest per annum =  10%

Step 3: Enter the time period                           =  3 years

Select the compounding frequency. If you select yearly, you can see in an instant that the

Total compound interest =₹3,595.65

Conclusion:

Apart from those mentioned above, a financial calculator can have many other uses. While the calculator can save you a lot of time, you should ensure that the numbers you enter are not based on guesswork to have a much accurate answer.

Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, AppasahebMarathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. AMFI Regn. No.: ARN-0845. PFRDA registration numbers:  POP no -05092018. I-Sec acts as a Composite Corporate agent having registration number –CA0113. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund, Corporate Fixed Deposits, Bonds, Alternate investment funds, Tax planning, Succession planning, NPS, IPO, Investment Advisory and Loans related services are not Exchange traded products and I-Sec is acting as a distributor to solicit these products. Please note, Insurance related services are not Exchange traded products and I-Sec is acting as a corporate agent to solicit these products.All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

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