Need formula to figure compound interest of a deposit for a year

U

Usedtobesmart

I need to know if I deposit a fix amount (i.e. $10,000) at a fixed interest
rate (i.e.5%)
what is the compound interest at the end of the year. Need one formula in
one cell not a schedule by month
 
D

Don

Assuming you mean "monthly compounding".

=(1+0.05/12)^12*10000-10000

= $511.62





Don Pistulka
 
G

GeorgeF

As soon as you say "compound", it implies more than once per year. Thi
covers any number of compounds for a year:

Total SUM = Deposit *( 1 + i/n)^n*N

where Total Sum is the resulting amount after investing the initia
Deposit at your nominal interest rate, i (expressed in decimal form
your 10% =0.10), and compounding it n times per year for N years. A
you see, as n gets larger,e.g. semi-annual, n=2, quarterly, n=4
monthly, n=12, etc., then Total SUM approaches an upper limit. If yo
want continuous compounding where n approaches infinity (wouldn't w
all love this on our bank accounts), then

Total SUM = Deposit * EXP^i*N

In reality, for small amounts of Deposit, daily compounding with n=36
is very close to the upper limit. so we're not so bad off after all.
The above is easily expressable in Excel.
I hope this helps. George
 

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