What is the formula for interest in excel

Managing personal finances can be a challenge, especially when trying to plan your payments and savings. Excel formulas and budgeting templates can help you calculate the future value of your debts and investments, making it easier to figure out how long it will take for you to reach your goals. Use the following functions:

• PMT calculates the payment for a loan based on constant payments and a constant interest rate.

• NPER calculates the number of payment periods for an investment based on regular, constant payments and a constant interest rate.

• PV returns the present value of an investment. The present value is the total amount that a series of future payments is worth now.

• FV returns the future value of an investment based on periodic, constant payments and a constant interest rate.

Figure out the monthly payments to pay off a credit card debt

Assume that the balance due is $5,400 at a 17% annual interest rate. Nothing else will be purchased on the card while the debt is being paid off.

Using the function PMT(rate,NPER,PV)

=PMT(17%/12,2*12,5400)

the result is a monthly payment of $266.99 to pay the debt off in two years.

• The rate argument is the interest rate per period for the loan. For example, in this formula the 17% annual interest rate is divided by 12, the number of months in a year.

• The NPER argument of 2*12 is the total number of payment periods for the loan.

• The PV or present value argument is 5400.

Figure out monthly mortgage payments

Imagine a $180,000 home at 5% interest, with a 30-year mortgage.

Using the function PMT(rate,NPER,PV)

=PMT(5%/12,30*12,180000)

the result is a monthly payment (not including insurance and taxes) of $966.28.

• The rate argument is 5% divided by the 12 months in a year.

• The NPER argument is 30*12 for a 30 year mortgage with 12 monthly payments made each year.

• The PV argument is 180000 (the present value of the loan).

Find out how to save each month for a dream vacation

You’d like to save for a vacation three years from now that will cost $8,500. The annual interest rate for saving is 1.5%.

Using the function PMT(rate,NPER,PV,FV)

=PMT(1.5%/12,3*12,0,8500)

to save $8,500 in three years would require a savings of $230.99 each month for three years.

• The rate argument is 1.5% divided by 12, the number of months in a year.

• The NPER argument is 3*12 for twelve monthly payments over three years.

• The PV (present value) is 0 because the account is starting from zero.

• The FV (future value) that you want to save is $8,500.

Now imagine that you are saving for an $8,500 vacation over three years, and wonder how much you would need to deposit in your account to keep monthly savings at $175.00 per month. The PV function will calculate how much of a starting deposit will yield a future value.

Using the function PV(rate,NPER,PMT,FV)

=PV(1.5%/12,3*12,-175,8500)

an initial deposit of $1,969.62 would be required in order to be able to pay $175.00 per month and end up with $8500 in three years.

• The rate argument is 1.5%/12.

• The NPER argument is 3*12 (or twelve monthly payments for three years).

• The PMT is -175 (you would pay $175 per month).

• The FV (future value) is 8500.

Find out how long it will take to pay off a personal loan

Imagine that you have a $2,500 personal loan, and have agreed to pay $150 a month at 3% annual interest.

Using the function NPER(rate,PMT,PV)

=NPER(3%/12,-150,2500)

it would take 17 months and some days to pay off the loan.

• The rate argument is 3%/12 monthly payments per year.

• The PMT argument is -150.

• The PV (present value) argument is 2500.

Figure out a down payment

Say that you’d like to buy a $19,000 car at a 2.9% interest rate over three years. You want to keep the monthly payments at $350 a month, so you need to figure out your down payment. In this formula the result of the PV function is the loan amount, which is then subtracted from the purchase price to get the down payment.

Using the function PV(rate,NPER,PMT)

=19000-PV(2.9%/12, 3*12,-350)

the down payment required would be $6,946.48

• The $19,000 purchase price is listed first in the formula. The result of the PV function will be subtracted from the purchase price.

• The rate argument is 2.9% divided by 12.

• The NPER argument is 3*12 (or twelve monthly payments over three years).

• The PMT is -350 (you would pay $350 per month).

See how much your savings will add up to over time

Starting with $500 in your account, how much will you have in 10 months if you deposit $200 a month at 1.5% interest?

Using the function FV(rate,NPER,PMT,PV)

=FV(1.5%/12,10,-200,-500)

in 10 months you would have $2,517.57 in savings.

• The rate argument is 1.5%/12.

• The NPER argument is 10 (months).

• The PMT argument is -200.

• The PV (present value) argument is -500.

See also

PMT function

NPER function

PV function

FV function

This tutorial will demonstrate various ways to calculate compound interest in Excel and Google Sheets.

What is Compound Interest?

When you invest money, you can earn interest on your investment. Say, for example, you invest $3,000 with a 10% annual interest rate, compounded annually. One year from the initial investment (called the principal), you earn $300 ($3,000 x 0.10) in interest, so your investment is worth $3,300 ($3,000 + $300). For the next period, you earn interest based on the gross figure from the previous period: $330 ($3,300 x 0.10) because your investment was worth $3,300. Now, it is worth $3,630.

The general formula for compound interest is: FV = PV(1+r)n, where FV is future value, PV is present value, r is the interest rate per period, and n is the number of compounding periods.

How to Calculate Compound Interest in Excel

One of the easiest ways is to apply the formula: (gross figure) x (1 + interest rate per period).

If you are investing $1,000 with a 15% interest rate, compounded annually, below is how you would calculate the value of your investment after one year.

= B2 * (1 + $A2)

In this case B2 is the Principal, and A2 is the Interest Rate per Period. The “$” is used in the formula to fix the reference to column A, since the interest rate is constant in this example.

You can calculate the value of your investment after two years by simply copying and pasting the formula into cell D2, as shown below.

C2 is the current gross figure. Notice how B2 automatically changes to C2, since the cell reference has changed. You could copy the formula over additional columns to calculate the compounded value in future years. We would recommend structuring a table like this (vertically instead of horizontally):

Rolling Total Compound Interest Table

The process above for calculating compound interest is easy, but if you want to figure out the value of your investment after 10 years, for example, this process is not efficient. Instead you could use a generalized compound interest formula.

General Compound Interest Formula (for Daily, Weekly, Monthly, and Yearly Compounding)

A more efficient way of calculating compound interest in Excel is applying the general interest formula: FV = PV(1+r)n, where FV is future value, PV is present value, r is the interest rate per period, and n is the number of compounding periods.

Say, for instance that you are investing $5,000 with a 10% annual interest rate, compounded semi-annually, and you want to figure out the value of your investment after five years. The spreadsheet below shows how this calculation can be done on Excel.

= B1 * (1 + $B2/2)^(B3 * B4)

In this case, PV is the Principal, r is (Annual Interest Rate) / 2 because interest is compounded semi-annually (twice per year), n is (Compounding Periods per Year) x (Year), and FV is the Investment Value. This process is more efficient than the first one because you don’t have to calculate the gross figure after each period, saving quite a few calculation steps.

FV Function and Compound Interest

Lastly, you can calculate compound interest with Excel’s built-in Future Value Function. Similar to the previous process, the FV function calculates the future value of an investment based on the values of certain variables.

The variables (as shown above) are:
– rate is the interest rate for each period.

– nper is the number of compounding periods.

– pmt is the additional payment per period, and it is represented as a negative number. If there is no value for “pmt,” put a value of zero.

– pv (optional) is the principal investment, which is also represented as a negative number. If there is no value for “pv,” you must include a value for “pmt.”

– type (optional) indicates when additional payments occur. “0” indicates that the payments occur in the beginning of the period, and “1” indicates that the payments are due at the end of the period.

The previous semi-annual compound interest example can be completed with the FV function.

= FV(B2 / B3, B3 * B4, 0, -B1)

The “rate” is (Annual Interest Rate) / (Compounding Period per Year), “nper” is (Compounding Periods per Year) x (Years), “pmt” is 0, and “pv” is – (Principal).

Understanding how to calculate compound interest is important for predicting investment performance, whether it’s for retirement planning or your personal portfolio, and Excel is an excellent tool to do so.

For more information about Compound Interest visit Investopedia

Calculate Compound Interest in Google Sheets

These formulas work exactly the same in Google Sheets as in Excel.

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Excel — is the versatile analytical and computational tool that is often used by lenders (banks, investors, etc.) and borrowers (businessmen, companies, private persons, etc.).

Quickly navigate in the intricate formulas, calculate to interest, payouts, overpayment to allow Microsoft Excel program functions.



How to calculate credit payments in Excel

Monthly payments depend on the loan repayment scheme. There are annuity and differentiated payments:

1. The annuity assumes that the client makes each month the same amount.
2. When the differentiated scheme of repayment of debt before the financial organization interest is charged on the balance of the loan amount. Therefore, the monthly payments will be reduced.

Increasingly used annuity: it`s more profitable for the bank, and it is more convenient for the majority of customers.

The calculation of annuity payments on the loan in Excel

The monthly annuity payment is calculated as follows:

S = C * V

where:

• S – sum, is the payment amount on the loan;
• C – coefficient, is the annuity payment rate;
• V – is the value of the loan.

The annuity factor Formula:

С = (i * (1 + i) ^ n) / ((1 + i) ^ n-1)

• where is i – the interest rate for the month, the result of dividing the annual rate by 12;
• n – is the loan term in months.

There is a special feature in Excel which said to the annuity payments. This is: =PMT().

1. Fill in the input data for calculating the monthly payments on the credit. This is loan amount, interest and term.
2. To make the repayment schedule. It`s empty till.
3. In the first cell of the column «Credit payments», introduced the formula of the calculating the loan annuity payments in Excel: =PMT($B$3/12,$B$4,$B$2). To fix the cells, are used to the absolute links. In the formula may be administered directly to the numbers and not the reference cell data. Then it will have the following form: =PMT(18%/12,36,100000).

The cells turned into red, because we’ll give these money to the bank and to lose the money.



The calculation of payments in Excel for the differentiated scheme of repayment

The differentiated payment method implies that:

• the principal amount is distributed over the period of payment in the equal installments;
• the loan interest accrued on the balance.

The formula for the calculating to the differential payment:

DP = NEO / (PP + PS * NEO)

where:

• DP – is the monthly payment on the loan;
• NEO – is the loan balance;
• PP – the number of remaining until the end of the repayment period;
• PS – is the interest rate per month (the annual rate divided by 12).

Draw up the schedule for repayment of the previous loan on the differentiated scheme.

The input dates are the same:

Lending terms
Amount of credit	$100 000
Interest rate	18%
Duration months	36

To make the schedule of repayment of the loan:

Number of the month	Balance receivable on the loan	Payment of interest	Payment of principal	Final payment
1 month

Balance receivable on the loan: in the first month it is equal to the entire amount =$B$2. In the second one and in the subsequent ones — calculated by the formula: =IF(D10>$B$4,0,E8-G9). Where is:

• D10 – the number of the current period;
• $B$4 – is the term of the loan;
• E8 – is the balance of the loan in the previous period;
• G9 — is the principal debt in the previous period.

Payment of interest: the balance of the loan in the current period multiplied by the monthly interest rate / 12 months: =E9*($B$3/12).

Payment of principal: the amount of the loan divided by the period: =IF(D9<=$B$4,$B$2/$B$4,0).

Final payment: the sum of «the interest» and «the main debt» in the current period: =F8+G8.

We substitute to the formulas in the corresponding columns. Copy them to the entire table.

To compare the overpayment on the annuity and the differentiated scheme of the repayment on credit:

The red figure – is the annuity (was taken 100 000 rubles), the black one – is the differentiated way.

Interest calculation formula for loans in Excel

The calculation of interest on the loan in Excel and calculate the effective interest rate, with the following information on the bank offers credit:

We carry out interest calculation on loan and calculate the effective interest rate with the following information on the bank offers credit.

Fill in the table type:

The commission is taken monthly from the whole sum. The total loan payment — this is the annuity payment plus the commission. The sum of the main debt and the sum of interest – there are components parts of the annuity payment.

The principal amount = the annuity payment – the interest.

The sum of interest = the remaining debt * the monthly interest rate.

The balance of principal = the residue of the previous period – the sum of the principal debt in the previous period.

Based on the table of monthly payments, calculate the effective interest rate:

• took the credit 500 000 rubles;
• returned to the bank — 684 881. 67 rubles (the sum of all payments on the loan);
• the overpayment was 184 881. 67 rubles;
• the interest rate — 184 881 67/500 000 * 100, or 37%.
• the harmless commission of 1% was cost for the borrower so expensive.

The effective interest rate of the loan without the commission will be 13%. The counting is carried out in the same way.

The calculation of effective interest rate in Excel

According to the law about the consumer credit for the calculation of the effective interest rate now is applied the new formula. EIR (Effective Interest Rate) is defined in percentage of up to the third decimal place according to the following formula:

• EIR = i * CHBP * 100;
• where is i — the interest rate of the base period;
• NBP — the number of base periods in a calendar year.

Take for example the following dates on the loan:

For calculating of the effective interest rate is necessary to make a payment schedule (see the order above).

It is necessary to determine the base period (BP). The law states that this is the standard time interval, which is found in most of the repayment schedule. Example BP = 28 days.

Then we find NBP: 365/28 = 13.

Now you can find the interest rate of the base period:

We have all the necessary dates — substitute them in the EIR formula: =B9*B8

To obtain the percentages in Excel, you do not need to multiple by 100. It is enough to set for the cell with the result to the percentage format.

EIR for the new formula is coincided with the annual interest rate on the loan.

Download credit calculator in Excel

Thus, for calculating the annuity payments on the loan is used the simplest function PLT. As you can see, the differentiated way of repayment is a bit more complicated.

In this article, we will learn how to use Simple interest formula in Excel.

Calculate the simple interest amount given the present or principal amount, rate in annum & period in years.
Syntax:

=PA * rate * period

PA : principal amount
Rate : Rate per annum
Period : Period in years

Let’s understand this function using an example.
Here we have a data set and to get Simple interest(SI) amount

We need to find the simple interest amount for the dateset.

Use the formula to get the simple interest amount

=A2 * B2 * C2

Press Enter

As you can see the simple interest amount for the dataset is $ 3500.

Note: Remember to keep the data in term of years.

Hope you understood how to get the simple interest amount in Excel. Explore more articles on Excel statistical function here. Please feel free to state your query or feedback for the above article.

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Compound interest is one of the most important financial calculations that most of us often use, and it’s a must to learn to calculate it in Excel.

But before you do that you need to understand what actually compound interest is.

Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Investopedia

In Excel, the method to calculate compound interest is simple.

Now, the thing is. You just need to use a calculation method and specify the time period for which you want to calculate.

So today, in this post, I’d like to show you how to calculate compound interest in Excel using different time periods. So let’s get started.

Yearly Compound Interest Formula

For calculating yearly compound interest, you just have to add the interest of the one year into next year’s principal amount to calculate the interest of the next year.

And, the formula in excel for yearly compound interest will be.

=Principal Amount*((1+Annual Interest Rate/1)^(Total Years of Investment*1)))

Let me show you an example.

In the above example, with $10000 of principal amount and 10% interest for 5 years, you will get $16105.

In the first year, you will get $10000*10% which is $1000, and in the second year, ($10000+$1000)*10% = $1100, and so on.

Quarterly Compound Interest Formula

Calculating quarterly compound interest is just like calculating yearly compound interest.

But, here you need to calculate interest four times a year. The interest amount for each quarter will add to the principal amount for the next quarter. To calculate the quarterly compound interest you can use the below-mentioned formula.

=Principal Amount*((1+Annual Interest Rate/4)^(Total Years of Investment*4)))

Here is an example.

In the above example, with $10000 of principal amount and 10% interest for 5 years, we will get $16386.

In the first quarter, we get 10000*(10%/4) which is $250, and in the second quarter, ($10000+$250)*(10%/4) = $256, and the same calculation method for 20 Quarters (5 years).

Monthly Compound Interest Formula

While calculating the monthly compound interest you need to use the basis you have used in other time periods.

You have to calculate the interest at the end of each month. And, in this method interest rate will divide by 12 for a monthly interest rate. To calculate the monthly compound interest in Excel, you can use the below formula.

=Principal Amount*((1+Annual Interest Rate/12)^(Total Years of Investment*12)))

In the above example, with $10000 of principal amount and 10% interest for 5 years, we will get $16453.

In the first month, we get 10000*(10%/12) which is $83.33 & in the second month, ($10000+$83.33)*(10%/12) = $84.02 and the same is for 60 months (5 years).

Daily Compound Interest Formula

While calculating daily compound interest again we have to use the same method with the below calculation formula. We have to divide the interest rate by 365 to get a daily interest rate.

So, you can use the below formula to calculate daily compound interest.

=Principal Amount*((1+Annual Interest Rate/365)^(Total Years of Investment*365)))

In the above example, with $10000 of principal amount and 10% interest for 5 years, we will get $16486.

On the first day, we get 10000*(10%/365) which is $4, and on the second day, ($10000+$4)*(10%/365) = $4, and the same is for every day for 5 years.

Sample File

By using the above methods, I have created a cumulative interest calculator [Template] to calculate all of the above calculations for interest in a single worksheet.

sample-files.xlsx