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welcome to Techybites, we teach you how to use windows office programs
today were calculating compound interest using excel
So before we get started we're gonna talk about some of the variables using in this formulas.
First is our principal amount or present value and we gonna call that (PV)
next we have our interest (X) percent per annum and we call that (R)
Total period in years is gonna be (n) yearns
so let's get into the methods conpounding
We got Yearly,
half yearly, quarterly and monthly like i said before
the formulas for the compound interest vary from method to method
for yearly
we have CI = (PV(1+r/100)n)-PV
we have CI = (PV(1+r/100)n)-PV
we have CI = (PV(1+r/100)n)-PV
for half yearly CI = (PV(1+r/2/100)2n)-PV
for half yearly CI = (PV(1+r/2/100)2n)-PV
for half yearly CI = (PV(1+r/2/100)2n)-PV
for half yearly CI = (PV(1+r/2/100)2n)-PV
similarly for quarterly we have
for half yearly CI = (PV(1+r/4/100)4n)-PV
for half yearly CI = (PV(1+r/4/100)4n)-PV
for half yearly CI = (PV(1+r/4/100)4n)-PV
and finally for monthly as there are 12 months in a year
CI = (PV(1+r/12/100)12n)-PV
CI = (PV(1+r/12/100)12n)-PV
CI = (PV(1+r/12/100)12n)-PV
all right now that we got all of our formulas done
Lets go to excel
okay now in an excel let's start with their titles
so in column A lets put Preset value (PV)
lets make column B
Rate (R)
Rate (R)
lets make column C are Period (n)
and
Lets make column D are Yearly compounded interest
Lets make column E are interest half yearly compounded
Lets make column F are interest quarterly compounded
Lets make column G are interest monthly compounded
so now we've got a title done we can actually start calculating
so let's put in PV
are present value are lets say five thousand
rate
let's make it 10.5 percent per annum
lets make the period 3 years
now its time to get the formula
so we saw that the formula was
after three years we get one thousand seven hundred and forty six point one six as our
compounded interest
now lets do our half yearly compounded interest
so referring to our formula again
we can see that quarterly compounded we have one thousand eight hundred and
twenty three point five one
as our compound interest of the three years
finally let's do our monthly compounded interest
if we compound monthly
right now looks go ahead and make a chart
so as you can see from the chart
the more
frequently we compound our interest the more money will have at the end
there's a lot of applications to compound interest
including but not limited to credit cards loans or any other bank dealings
so it's important to know your compound interest and how it's calculated