That would look more like this.Įxamine LF-Compound Daily 360 and LF-Compound 365 for true daily compounding interest calculations. If interest were being calculated on the exact number of days each month and then added to the balance at the end of the month (similar to credit card interest calculations on regular purchase), then we’d need to divide the rate by 365 and then multiply it by the number of days in that period. With interest compounding monthly, each successive row with its end of month date in each succeeding month needs this formula copied down from row the second date row to the bottom to arrive at the compounded interest. $5,000 + ($5,000X (.015/12)) = $5,000.21Looking at the sample worksheet tab, named LF-Compounded Monthly, we see that our opening deposit is on. 21To get to the balance with the interest, we simply add the starting balance back to it. We’d take the result of that and add it back to the $5,000. If we were doing this with a calculator, we’d take $5,000 and multiply it by the 1.5% rate after dividing it by 12 to account for the monthly interest rate.
In this first example, we’ll assume a one and a half percent (1.5%) interest rate over a period of 12 months and a beginning balance of $5,000. There are two methods you can use, the long form and the FV (future value) function.ĭownload ExcelCompoundInterest.xlsx to see the examples.
Whether for personal or business application, it’s a good idea to know how to calculate compound interest for loans and investments. By Melissa Esquibel Categories: Excel® Tags: excel formula for compound interest
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