The "Interest Calculator API" project involves developing a simple API that allows users to calculate interest on loans or savings. The API will support both simple and compound interest calculations based on user inputs such as principal amount, interest rate, time period, and compounding frequency (for compound interest). The API will return the total interest accrued, as well as the final amount. The goal is to provide an easy-to-use and accurate API that can be integrated into financial applications, educational tools, or personal finance platforms.
Detailed Description
Interest calculation is essential in many financial applications, whether for loans, mortgages, savings accounts, or investments. This project will build an API that handles the two most common types of interest: simple interest and compound interest. Users will input relevant data such as principal, rate, time period, and, for compound interest, the frequency of compounding. The API will calculate and return the interest accrued over the period and the final balance.
Supported interest types:
Simple Interest: Calculated as SI=P×r×t\text{SI} = P \times r \times tSI=P×r×t, where PPP is the principal, rrr is the interest rate, and ttt is the time period.
Compound Interest: Calculated as CI=P×(1+rn)nt−P\text{CI} = P \times (1 + \frac{r}{n})^{nt} - PCI=P×(1+nr)nt−P, where PPP is the principal, rrr is the interest rate, nnn is the number of times the interest is compounded per time period, and ttt is the time period.
Example Usage
A user wants to calculate the compound interest on a savings account with a principal of $1,000, an annual interest rate of 5%, compounded quarterly, over a period of 3 years. The API will return the total interest accrued and the final amount:
Input: Principal = $1,000, Rate = 5%, Time = 3 years, Frequency = Quarterly
Output:
Interest: $161.62
Final Amount: $1,161.62
Table of Contents
1. Introduction
The "Interest Calculator API" will allow users to calculate interest on a given principal for both simple and compound interest. The API will accept inputs such as the principal amount, interest rate, time period, and, for compound interest, the compounding frequency. It will return the interest accrued and the total amount. The API aims to be fast, reliable, and easy to integrate into financial or educational platforms.
2. Objectives
Provide accurate calculations for both simple and compound interest.
Accept inputs such as principal, rate, time period, and compounding frequency (for compound interest).
Return the total interest accrued and the final balance.
Ensure the API is scalable, fast, and easy to integrate into web or mobile applications.
3. Functional Requirements
Interest Calculation
Simple Interest Calculation: Calculate simple interest using the formula SI=P×r×t\text{SI} = P \times r \times tSI=P×r×t.
Compound Interest Calculation: Calculate compound interest using the formula CI=P×(1+rn)nt−P\text{CI} = P \times (1 + \frac{r}{n})^{nt} - PCI=P×(1+nr)nt−P.
Compounding Frequency: Support different compounding frequencies, such as yearly, semi-annually, quarterly, monthly, or daily.
Total Amount: Return both the total interest accrued and the final balance (principal + interest).
Input Validation
Validate Inputs: Ensure that all inputs (principal, rate, time period, and compounding frequency) are valid numbers and within reasonable ranges.
Negative Values: Handle edge cases such as negative or zero values for principal, rate, or time period, and return appropriate error messages.
Optional Features
Currency Conversion: Allow users to input currency (e.g., USD, EUR) and convert the result into the desired currency.
Batch Calculations: Enable users to perform batch calculations for multiple interest queries in one request.
4. Non-Functional Requirements
Scalability: The API should handle a large number of requests concurrently, especially when integrated into financial applications.
Performance: Ensure that interest calculations are performed and returned in under 100ms.
Reliability: Ensure accurate calculations for both simple and compound interest across various input ranges.
5. Use Cases
Calculate Simple Interest: A user inputs the principal, rate, and time period, and the API returns the simple interest and total amount.
Calculate Compound Interest: A user inputs the principal, rate, time period, and compounding frequency, and the API returns the compound interest and total amount.
Handle Invalid Input: A user enters invalid data (e.g., negative principal or rate), and the API returns a clear error message.
6. User Stories
As a user, I want to calculate simple interest on a loan so that I know how much I will owe at the end of the period.
As a user, I want to calculate compound interest on my savings account to see how much my investment will grow over time.
As a user, I want to specify the compounding frequency (e.g., monthly or quarterly) to ensure accurate compound interest calculations.
As a user, I want to receive an error message when I input invalid data (e.g., negative principal or rate) so that I can correct my inputs.
As a developer, I want to integrate the API into my finance application to provide interest calculation functionality for my users.
7. Technical Requirements
Programming Language: Use backend languages such as Node.js, Python, or Ruby.
Framework: Use Express.js (Node.js), Flask (Python), or Rails (Ruby) for routing and API logic.
Currency Support (Optional): Use a currency conversion API if providing optional currency conversion functionality.
Database (Optional): If tracking historical calculations or logs, use a relational or NoSQL database.
8. API Endpoints
Calculate Simple Interest
Endpoint:
POST /api/calculate/simple-interest
Calculate Compound Interest
Endpoint:
POST /api/calculate/compound-interest
Handle Invalid Input
Endpoint:
POST /api/calculate/simple-interest
9. Security
HTTPS: Use HTTPS to ensure secure communication between the client and server.
Input Validation: Validate all input data to ensure only valid numbers are accepted for principal, rate, time, and frequency.
Rate Limiting: Implement rate limiting to prevent abuse of the API (e.g., excessive requests).
10. Performance
Low Latency: Ensure that interest calculations are processed and returned in under 100ms.
Caching: Cache frequently requests calculations (e.g., common principal, rate, and time combinations) to reduce processing time for recurring queries.
11. Documentation
Provide API documentation using Swagger or a similar tool to help developers integrate the Interest Calculator API into their applications.
Include examples of requests and responses for both simple and compound interest calculations, as well as error handling for invalid inputs.
12. Glossary
Principal: The initial amount of money invested or borrowed.
Rate: The percentage of interest applied to the principal amount over time.
Time Period: The duration (typically in years) over which the interest is calculated.
Simple Interest: Interest is calculated only on the principal amount.
Compound Interest: Interest calculated on both the principal and any previously accumulated interest.
13. Appendix
Include flowcharts or diagrams showing the steps involved in simple and compound interest calculations.
