Compound Interest

  • Thread starter Thread starter RickS
  • Start date Start date
R

RickS

I see the formula for calculating annually compounded interest. Is there a
function formula for daily compounding of interest?

RickS
 
Try using the rate function and setting the nper = 360 or 365
(depending on how many days you want to use).
 
Thanks Tim, are you suggesting I do this with the NPER or PV formulas? But
where do I put the 360 basis, in the formula as described in Excel Help?
Which component is the basis? NPER(rate, pmt, pv, fv, type)


RickS
 
Rick

You need to use the annual rate divided by the number of periods. For example, with a 5% annual
rate

Annual:
=FV(0.05,1,0,1000,1)

Monthly:
=FV(0.05/12,12,0,1000,1)

Daily:
=FV(0.05/365,365,0,1000,1)

All the financial functions work the same general way.

HTH,
Bernie
MS Excel MVP
 
There are some instances were (1.05^(1/365)-1) is the correct interest rate
to be used - it all depends if you are dealing wth nominal or effective
interest rates.

Granted that .05/365 is used in more cases than what I posted - but one
needs to know which rate to use...
 
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