# Investing - Compound Interest

by Zahra
(BRISBANE, AUSTRALIA)

if i place a number other than '1' into the first cell, i get an incorrect value in an another cell. What value should be in that cell? what is an excel formula that will ensure all values are correct regardless of the starting year?

Compound Interest
Interest Rate 5.65%
Principal \$4,800.00
Rests per Year(n) 365

Time (year) Principal (\$) Yearly Interest Total Interest
5 \$6,366.78 \$1,566.78 \$1,566.78
2 \$5,374.19 -\$992.60 \$574.19
3 \$5,686.54 \$312.36 \$886.54
4 \$6,017.06 \$330.51 \$1,217.06
5 \$6,366.78 \$349.72 \$1,566.78
6 \$6,736.83 \$370.05 \$1,936.83
7 \$7,128.39 \$391.56 \$2,328.39
8 \$7,542.71 \$414.32 \$2,742.71
9 \$7,981.10 \$438.40 \$3,181.10
10 \$8,444.98 \$463.88 \$3,644.98
11 \$8,935.82 \$490.84 \$4,135.82
12 \$9,455.19 \$519.37 \$4,655.19
13 \$10,004.74 \$549.55 \$5,204.74
14 \$10,586.24 \$581.50 \$5,786.24
15 \$11,201.53 \$615.29 \$6,401.53
16 \$11,852.58 \$651.06 \$7,052.58
17 \$12,541.48 \$688.90 \$7,741.48
18 \$13,270.42 \$728.94 \$8,470.42
19 \$14,041.72 \$771.30 \$9,241.72
20 \$14,857.85 \$816.13 \$10,057.85
21 \$15,721.42 \$863.57 \$10,921.42
22 \$16,635.18 \$913.76 \$11,835.18
23 \$17,602.05 \$966.87 \$12,802.05
24 \$18,625.12 \$1,023.07 \$13,825.12
25 \$19,707.64 \$1,082.53 \$14,907.64
26 \$20,853.09 \$1,145.45 \$16,053.09
27 \$22,065.12 \$1,212.02 \$17,265.12
28 \$23,347.58 \$1,282.47 \$18,547.58
29 \$24,704.59 \$1,357.01 \$19,904.59
30 \$26,140.47 \$1,435.88 \$21,340.47

### Comments for Investing - Compound Interest

 Sep 01, 2011 Investing - Compound Interest by: Staff The question: by Zahra (BRISBANE, AUSTRALIA) if i place a number other than '1' into the first cell, i get an incorrect value in an another cell. What value should be in that cell? what is an excel formula that will ensure all values are correct regardless of the starting year? Compound Interest Interest Rate 5.65% Principal \$4,800.00 Rests per Year(n) 365 The answer: I’m glad you’re using Excel to solve this kind of a problem. A spread sheet is great for viewing every time period. As you know, excel does not provide a standard function to compute compound interest. Therefore, you must create your own. The compound interest formula will be in your textbook, but here it is: INV =PV*(1+R)^N INV = Value of Investment at the end of the nth time period PV = present value of the investment at time zero PV = the original investment = \$4800 R = interest rate for each time period N (The interest rate R is COMPOUNDED DAILY for your problem) R_annual_percent_form = the 5.65% (5.65% must be converted to a decimal value) R_annual_decimal_form = 5.65%/100 = .0565 (the annual interest rate in decimal form must be converted to a daily interest rate in decimal form) R_daily_decimal_form = .0565/365 days (I didn’t divide these two numbers. Instead I put .0565/365 directly into the excel formula) R_daily_decimal_form = .0565/365 N = time period in days = Time in years * 365 days per year Here is a summary of the values which you should use in the compound interest formula: PV = 4800 R = .0565/365 N = years * 365 INV =PV*(1+R)^N INV =4800*(1+.0565/365)^( years*365) Your Excel spreadsheet can be set up like this: . . . . . . .Col 1 . . Col 2 . . . .Col 3 . . . . . . Col 4. . . . . .Col 5 Row 1 . years . . days . Principle (\$) . . Yearly Int . . Total Int (titles) Row 2 . . . 0 . .(blank) . . . . 4800 . . . . . . . .0 . . . . . . . . 0 (values at time zero) Row 3 . . . 1 . =R3C1*365. . =4800*(1+0.0565/365)^R3C2 . . =R3C3-R2C3 . . =R2C5+R3C4 (excel formulas to compute the values at the end of year 1) Row 4 . . . 2 . =R4C1*365. . =4800*(1+0.0565/365)^R4C2 . . =R4C3-R3C3 . . =R3C5+R4C4 (excel formulas to compute the values at the end of year 2) Row 5 . . . 3 . =R5C1*365. . =4800*(1+0.0565/365)^R5C2 . . =R5C3-R4C3 . . =R4C5+R5C4 (excel formulas to compute the values at the end of year 3) Row 6 . . . 3 . =R6C1*365. . =4800*(1+0.0565/365)^R6C2 . . =R6C3-R5C3 . . =R5C5+R6C4 (excel formulas to compute the values at the end of year 4) . . . (1) Click the following link to VIEW a snapshot of the excel spreadsheet computations; or (2A) highlight and copy the link, then (2B) paste the link into your browser Address bar & press enter: Use the Backspace key to return to this page: http://www.solving-math-problems.com/images/Comp_Int_Table_2011-09-01.png Thanks for writing. Staff www.solving-math-problems.com

 Sep 02, 2011 compound interest by: Zahra it asks to: construct a similar spreadsheet showing the \$4800 at 5.65% over 12 years suing simple interest. my answer: Simple Interest Principal \$4,800.00 Interest Rate 5.65% Time 12 Time (year) Interest (\$) Total Interest 1 \$271.20 \$5,071.20 2 \$542.40 \$5,342.40 3 \$813.60 \$5,613.60 4 \$1,084.80 \$5,884.80 5 \$1,356.00 \$6,156.00 6 \$1,627.20 \$6,427.20 7 \$1,898.40 \$6,698.40 8 \$2,169.60 \$6,969.60 9 \$2,440.80 \$7,240.80 10 \$2,712.00 \$7,512.00 11 \$2,983.20 \$7,783.20 12 \$3,254.40 \$8,054.40 Now the question is: Place a number other than '1' into A7 (=time:1st year) a) identify the cell which has an incorrect value in it. b) what value should be in that cell? c) write an excel formula that will ensure all values are correct regardless of the starting year.

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