Excel template monthly compound interest
Excel template monthly compound interest
This article provides details of Excel template monthly compound interest that you can download now.
Microsoft Excel software under a Windows environment is required to use this template
These Excel templates monthly compound interest work on all versions of Excel since 2007.
Examples of a ready-to-use spreadsheet: Download this table in Excel (.xls) format, and complete it with your specific information.
To be able to use these models correctly, you must first activate the macros at startup.
The file to download presents three Excel templates monthly compound interest
- Compound Interest Calculator Template
This Compound Interest spreadsheet was created as an educational tool to verify and visualize how compound interest calculations work.
Although it can be used for both savings and loan calculations, it was designed primary for savings. For example, the Principal and Payment are entered as positive values for savings. The Principal is entered as a negative value for loans.
Caution
All results should be verified and used with caution. Except for Daily Compounding, the calculations were designed to be identical to those calculated using the standard compound interest formulas. Banks, lenders, or other institutions may be using other methods of calculating interest.
- Compound Interest Calculator toolkit
- The compound interest calculators in this toolkit can answer questions about investments, savings accounts, loans and single or regular investments.
You can also convert your interest and earnings rates to yearly, daily, weekly or monthly rates.
- All dollar amounts are in dollars of the day, not adjusted for inflation.
- Interest payments are assumed to be credited at the end of each year, and fully re-invested.
Fees and taxes may also apply to your investments.
- Take care with interest rates that look too good to be true.
Excel templates monthly compound interest with graph
Compound Interest
“Money doesn’t grow on trees.” While this is true, money does make more money, if it collects interest. Interest is money that one pays for the use of someone else’s money.
Most people know that if you put money in a bank, you will get more money over time. The bank is paying you to use your money for investments and loans.
The longer the money is in the bank, the more money you will get. And it makes sense that if you get put your money in a bank with high interest, you will get more money than if you put it in a lower interest bank. But how does it all work? Let’s investigate.
To begin, we need to define some terms. When a person deposits money in a bank, that initial amount is called the principal and is typically denoted by the letter P. The rate at which that the principal collects interest is called the interest rate and is denoted by the letter r. (The rate is typically expressed as a decimal and not as a percentage.) While all of this is going on, time elapses, and is denoted by t.
There are two types of interest: basic interest and compound interest. Basic interest is paid only once. For example, you may lend $100 to a friend and ask for 10% (0.1) interest every year until you are repaid. If your friend pays you back in two years, your friend will owe you $120, but why?
Your friend is responsible for paying back the initial amount, the principal, as well as paying 10% on that principal for two years. 10% of $100 is $10, and times two years is $20. So your friend will pay you $100 + $20 = $120. This reasoning is summarized in the following formula.
Basic Interest Formula
If a principal of P dollars is borrowed for t years at an annual interest rate of r, then the interest, I, will be
The interest charged according to formula (1) is called basic interest.
Compound interest, on the other hand, is interest paid on previously earned interest. Suppose, instead of paying 10% interest when the money is given back, you have your friend pay you 10% on the money he still has every year. If he doesn’t pay you back for two years, then you will get 10% on $100 the first year, which is $110 and you will get 10% on $110, which is $121 at the end of the second year. Instead of getting $20, you will get $21. Another example might help explain this concept.
However, the above formula only works for interest compounded n times in one year. In the more general case with t years, the principal will compound nt times. So, we have the following formula.