Formula - Compound Interest?

  • Thread starter Thread starter JoeBloe
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JoeBloe

Does anyone know any easy way to calculate the value of an investment where
you put for example, $1000 per week into an account that has 6% interest for
12 months. Also, similar scenario where you put $4000 per month into an
account @ 6% interest. How do you calculate it's value after 12 months.

Thanks
 
Does anyone know any easy way to calculate the value of an investment where
you put for example, $1000 per week into an account that has 6% interest for
12 months. Also, similar scenario where you put $4000 per month into an
account @ 6% interest. How do you calculate it's value after 12 months.
Click to expand...

To compute this accurately, you need to specify the compounding
frequency. To simplify computation, we might assume that the
compounding frequency is the same as the deposit frequency. But
understand that that is normally not true in real life.

Also, you need to specify the nature of the investment so that we can
properly interpret what you mean by "6% interest". The following
applies to regular savings accounts.

Weekly: =fv(6%/52, 52, -1000)

Monthly: =fv(6%/12, 12, -4000)

If you want to see the mathematical formula, look at the PV help
page. (Yes, PV, not FV. Sigh.)
 
Errata....

Also, you need to specify the nature of the investment so that we can
properly interpret what you mean by "6% interest". The following
applies to regular savings accounts.

Weekly: =fv(6%/52, 52, -1000)
Monthly: =fv(6%/12, 12, -4000)
Click to expand...

More to the point, you need to specify whether "6% interest" is the
nominal rate or the APY (e.g. compound rate). I made the assumption
above that it is the nominal rate in order to keep it simple.
 
Sun, 8 Jul 2007 16:49:57 +1000 from JoeBloe
Does anyone know any easy way to calculate the value of an investment where
you put for example, $1000 per week into an account that has 6% interest for
12 months. Also, similar scenario where you put $4000 per month into an
account @ 6% interest. How do you calculate it's value after 12 months.
Click to expand...

Insert | Function
and type "compound interest" (no quote marks) in the first box.
 
Errata #2 (sigh)....

Weekly: =fv(6%/52, 52, -1000)
Monthly: =fv(6%/12, 12, -4000)
Click to expand...

Those should be:

Weekly: =fv(6%/52, 52, -1000, 0, 1)
Monthly: =fv(6%/12, 12, -4000, 0, 1)

The "1" at the end puts the payment at the beginning of the period.

Again, this assumes the 6% is the nominal interest rate, not the APY
(compounded rate).
 
Does anyone know any easy way to calculate the value of an investment where
you put for example, $1000 per week into an account that has 6% interest for
12 months. Also, similar scenario where you put $4000 per month into an
account @ 6% interest. How do you calculate it's value after 12 months.

Thanks
Click to expand...
Check out Excel help for the FV function.
 
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