Explanation
If you have an annual interest rate, and a starting balance you can calculate interest with:
=balance * rate
and the ending balance with:
=balance+(balance*rate)
So, for each period in the example, we use this formula copied down the table:
=C5+(C5*rate)
With the FV function
The FV function can also be used to calculate future value. The equivalent formula is:
=FV(rate,1,0,-C5)
The interest rate is used as-is, since we are compounding annually, nper is 1, since there is only one period per year, pmt is zero, since there are no additional payments, and pv is the starting balance, input as a negative value by convention.
Related formulas
Calculate simple interest
The general formula for simple interest is: interest=principal*rate*term So, using cell references, we have: =C5*C7*C6 =1000*10*0.05 =500
Calculate compound interest
Compound interest is a financial concept that describes how an initial investment grows over time, taking into account not only the interest earned on the initial amount but also the interest earned on the interest itself. Compound interest allows your money to grow exponentially, which makes it a...
Related functions
FV Function
The Excel FV function is a financial function that returns the future value of an investment. You can use the FV function to get the future value of an investment assuming periodic, constant payments with a constant interest rate.
