# Excel - Compound Interest

Dirty Dick 12:10 24 Feb 2008
Locked

How do I get to calculate compound interest, I have a monthly deposit, with a variable interest, over a variable monthly time. I can see how to do simple interest, but can't fathom out compound interest.

Thanx

DD

VoG II 12:11 24 Feb 2008

Dirty Dick 12:55 24 Feb 2008

I have tried your suggestion but it states that it applies to
• Microsoft Excel 2000 Standard Edition
• Microsoft Excel 2002 Standard Edition
• Microsoft Excel 97 Standard Edition
• Microsoft Excel 95 Standard Edition
• Microsoft Excel 95a
and I forgot to mention I am running Excel 2007

Thanx

Zak 13:51 24 Feb 2008

Does it work in Excel 2007? I think it should.

Also try FVSchedule function:

Dirty Dick 18:18 25 Feb 2008

I've tried your suggestion again. I have put in Cell A1 the title "Present Value , and in A2 inputted the figure £350. In Cell B1 the title "Interest Rate", and in B2 5.05 (manually inputted. In Cell C1 ihave the title "Time", and in C2 I have manually inputted the figure 1. In D4 I have put the formula =A2*(1+B2)^C2. The figure given in that cell is 2117.50

That is only calculating for 1 period, whether it is a month or a year.

The figure, done on my calculator is £367.67p

Where am I going wrong.

Thanx

VoG II 18:22 25 Feb 2008

In B2 you need 5.05% or 0.0505 - this will then give the correct result.

Dirty Dick 18:28 25 Feb 2008

Thanx, so esay to miss that.

BUT

This particular formula only calculates for the amoount that is in NOW.

How can I adjust the calculations if I put in £350 every period for say a period of 31, with the same interest rate, but compounding the interest so that the amount of interest is added every time period

Thanx again

VoG II 18:54 25 Feb 2008

csqwared 19:11 25 Feb 2008

Compound Interest: The future value (FV) of an investment of present value (PV) dollars earning interest at an annual rate of r compounded m times per year for a period of t years is:

FV = PV(1 + r/m)mt
or

FV = PV(1 + i)n

where i = r/m is the interest per compounding period and n = mt is the number of compounding periods.

One may solve for the present value PV to obtain:

PV = FV/(1 + r/m)mt

Numerical Example: For 4-year investment of \$20,000 earning 8.5% per year, with interest re-invested each month, the future value is

FV = PV(1 + r/m)mt = 20,000(1 + 0.085/12)(12)(4) = \$28,065.30

Notice that the interest earned is \$28,065.30 - \$20,000 = \$8,065.30 -- considerably more than the corresponding simple interest.

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