Calculation of compound interest can be achieved in Excel through FV functions or manual formulas. 1. Prepare the data structure, including principal, annual interest rate, compound interest frequency and time; 2. Use the FV function, enter the interest rate for each period (annual interest rate ÷ compound interest times), the total number of periods (years × compound interest times), the amount of payment per period is 0, the present value is the principal and add a negative sign; 3. Manually write the multiplication formula: principal × (1 interest rate)^ years, which is applicable to compound interest by year; 4. If compound interest is compounded by month, then divide the annual interest rate by 12, and multiply by 12, the formula becomes principal × (1 annual interest rate/12)^ (years × 12), thereby increasing the final return.

Calculating compound interest is actually quite simple in Excel. The key is to figure out how to use the formula. Compound interest is not like single interest only counting the interest on the principal. It will also add the interest generated before and continue to generate interest, so the profit will significantly increase in the long run. In Excel, we can use a basic formula to quickly calculate the results.

Basic formula: FV = P × (1 r)^n

• P is the principal
• r is the interest rate per issue (such as annual interest rate or monthly interest rate)
• n is the total number of periods (such as years or months)

Just fill in these parameters into the Excel cell and enter the formula to automatically calculate it.

1. Prepare the data structure

First think about what compound interest situation you are calculating, such as compound interest by year, monthly or quarterly. Then set a few columns in Excel:

• Principal
• Annual Rate
• Compound interest frequency (such as once a year, 4 times a quarter, etc.)
• Time (years)

For example:

After sorting it out, you can apply the formula next.

2. Use FV function to calculate directly

Excel has a ready-made financial function FV() , which is specially used to calculate future value, including compound interest. Its basic writing is:

 =FV(rate, nper, pmt, [pv], [type])

The parameters we mainly use are:

• rate : interest rate per issue (annual interest rate ÷ compound interest times)
• nper : Total number of periods (years × compound interest times)
• pmt : The amount paid for each period is, if you don’t add money, fill in 0
• pv : the present value, that is, the principal, and the negative sign is added before it to indicate expenditure

So if the above example is to be calculated, the formula is:

 =FV(5%/1, 5*1, 0, -10000)

This will result in the total amount of principal and interest in five years.

3. Manual multiplication formula can be done

If you don't want to use FV functions, you can also use the most primitive method:

 = principal*(1 interest rate)^ years

For example, the above example can be written as:

 =10000*(1 5%)^5

This method is suitable for compound interest once a year, and it is more intuitive to operate, but it is slightly less flexible.

4. What should I do if I have monthly compound interest?

What many people are prone to mistake is the "compound interest cycle". For example, if the annual interest rate is also 5%, if it is compounded on a monthly basis, then the annual interest rate must be divided by 12 and the number of years is multiplied by 12.

So the formula becomes:

 =FV(5%/12, 5*12, 0, -10000)

Or write manually:

 =10000*(1 5%/12)^(5*12)

At this time, you will find that the final amount is a little higher than the compound interest per year, which is the impact of the compound interest frequency.

Basically that's it. Excel does not require too complicated steps to calculate compound interest. Just match the parameters and formulas to get the results quickly. Different compound interest methods will affect the final profit, so when using it, don’t forget to adjust the parameters in the formula according to the actual situation.

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