Compound Interest Calculation in Excel
The formula for compound interest calculation is :
[Amount Invested] * [ {1 + ( Interest Rate Per Annum)} ^ {Number Of Years} ]
For instance, we want to calculate the total return of our initial investment amount for a specific duration at 10% p.a. interest rate, see below :
Amount Invested = $10,000
Interest Rate Per Annum = 10% or 0.1
Number Of Years = 35 years
Calculation steps in Excel :
1. Open a new Microsoft Excel worksheet
2. Point to any empty cells in the worksheet
3. Key in : =(10000) * ( (1+0.1)^(36))
Note : If you invested at age 20 until age 55. Total years of investment is actually 36 and not 35.
4. You will get $309,126.81
If you want to calculate compound interest on a monthly basis, then you will need to divide the Interest Rate Per Annum with 12, and multiply number of years with 12 to get the number of months. See below :
Amount Invested = $10,000
Interest Rate Per Annum = 0.1/12 or 0.0083333
Number Of Years = 35 years * 12 = 420 months
That explains the calculation of Compound Interest in Excel.
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