When you invest your money such, you can earn interest on your investment amount. for example, you invest $3,000 with a 10% annual interest rate, compounded annually. One year from the initial investment (called the principal), you earn $300 ($3,000 x 0.10) in interest, so your investment is worth $3,300 ($3,000 + $300). For the next period, you earn interest based on the gross figure from the previous period: $330 ($3,300 x 0.10) because your investment was worth $3,300. Now, it is worth $3,630.
Formula :
=B27*(1+A27)
=C27*(1+A27)
The general formula for compound interest is: FV = PV(1+r)n, where FV is future value, PV is present value, r is the interest rate per period, and n is the number of compounding periods.
How to Calculate Compound Interest in Excel
If you are investing $1,000 with a 10% interest rate, compounded annually, below is how you would calculate the value of your investment after year.
Formula :
=B27*(1+A27)
=C27*(1+A27)
Compound Interest Calculation Using FV Function In Excel
you can calculate compound interest using fv function in Excel. FV function calculates the future value of an investment based on the values of certain variables.
Formula :
=FV(B52/B53,B53*B54,0,-B51)
Download Excel Sheet For Practice
