Interest Earned on Investment w/Daily Compounding

[Guest]

I am looking for a function that will allow me to calculate interest earned
on an investment such as a 3 year CD, that compounds daily.

Thanks,
Lia

 

[Bernard Liengme]

If I invest P dollars at r% then at then end of the period it is worth P +
Pr or P(1+r)
So after the second period it is worth P(1+r) + P(1+r)r (principal +
interest)
This the same as P(1+r)^2
So after n periods it is worth P(1+r)^n.
Since it was worth P at the start, the interest is P(1+r)^n - P

If the annual rate is R, the daily rate is R/365 (r=R/365)
3 years is 3*365 so n=3*365
Some people use a fictional 360-day year for these calculations


best wishes

 

[Guest]

Thanks a lot!
Liz

If I invest P dollars at r% then at then end of the period it is worth P +
Pr or P(1+r)
So after the second period it is worth P(1+r) + P(1+r)r (principal +
interest)
This the same as P(1+r)^2
So after n periods it is worth P(1+r)^n.
Since it was worth P at the start, the interest is P(1+r)^n - P

If the annual rate is R, the daily rate is R/365 (r=R/365)
3 years is 3*365 so n=3*365
Some people use a fictional 360-day year for these calculations


best wishes