Article ID: 141695 - View products that this article applies to.
This article was previously published under Q141695
For a Microsoft Excel 98 version of this article, see 191017
Compound interest is the amount that a dollar invested now will be worth in a given number of periods at a given compounded interest rate per period.
Although Microsoft Excel does not include a function for determining compound interest, you can use the following formula for this calculation
=PV*(1+R)^Nwhere PV is present value, R is the interest rate, and N is the number of investment periods.
Suppose you have $1,000.00 in an investment account. The account pays 8 percent interest and this interest is compounded annually. How much will the investment be worth at the end of three years? There are two ways to find the amount:
Use a Fixed FormulaThe following formula typed into a cell on a worksheet, returns the correct value of $1,259.71:
=1000*(1+.08)^3However, all of the information is 'hard-coded' into the formula and you must manually change the formula any time the figures change.
Create a Function Macro to Determine Compound InterestMicrosoft provides programming examples for illustration only, without warranty either expressed or implied. This includes, but is not limited to, the implied warranties of merchantability or fitness for a particular purpose. This article assumes that you are familiar with the programming language that is being demonstrated and with the tools that are used to create and to debug procedures. Microsoft support engineers can help explain the functionality of a particular procedure, but they will not modify these examples to provide added functionality or construct procedures to meet your specific requirements.
A custom function is more flexible because none of the actual raw data is 'hard-coded' into the function; the user just types the data for the calculation instead of the actual calculation. To create this custom function, follow these steps:
"Cost Accounting-A Managerial Approach," Charles T. Horgren, Prentice- Hall,Inc., Fourth Edition, pages 906-907