How To Calculate Compound Interest By Hand In Excel Explained

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In this video we discuss how to create a compound interest formula in excel. We go through the formula entry step by step in an example worksheet in excel • Transcript/notes • Here is the formula for compound interest. • As an example, let’s say that someone invests $2000 in an account that pays 7.5% interest per year. The interest is compounded quarterly, so 4 times per year. What is the value of the account after 5 years? • We are going to calculate the compound interest amount and put the answer in cell D2, so we left click on cell D2, so it is highlighted. Next, we type in an equals sign. Referring to the compound interest formula, we left click on the principal amount, cell B2, now we type in a multiplication sign, which in excel is an asterisk, which is shift 8 on the keyboard, then we type in an open parenthesis. • Next, we left type in a 1, then we type in another open parenthesis, and then we type in plus or addition sign. Next, we type in another open parenthesis, then we left click on rate amount, cell B3. Now we type in a division sign, which is a forward slash on the keyboard. Next, we left click on the number of compounding periods per year, which is cell B4. Now we type in 2 closed parentheses, the fist closed parenthesis closes off the r over n portion of the formula, and the 2nd parenthesis closes off the 1 plus r over n portion of the formula. • Next we type in a carrot symbol, which is shift 6 on the keyboard, and this is the to a power symbol in excel. Then we type in an open parenthesis, and they we left click on the number of compounding periods, again, cell B4. Now we type in a multiplication sign, shift 8 on the keyboard, then we left click on the time amount, which is cell B5. Next we type in a closed parenthesis to close off the n times t portion of the formula. And finally, we hit the enter key, and we have our answer of $2899.896. • Chapters/Timestamps • 0:00 Formula for compound interest • 0:15 How to calculate compound interest in excel

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