Compound Interest in Excel
Compound interest grows a principal by applying the rate to the growing balance. FV is the clean approach.
=FV(rate, nper, pmt, -pv)
=FV(0.05/12, 12*10, 0, -10000)
=PV*(1+rate)^nEffective annual rate
=EFFECT(0.05, 12)Watchouts
- Match rate period to nper (monthly rate with monthly periods)
- Sign convention: money out negative for FV/PV
PMT loan payment · Error directory