To calculate the compound interest on an investment using the COMPOUND function in Excel, follow these steps:
- Enter the initial investment amount in cell A1.
- Enter the annual interest rate in cell A2.
- Enter the number of compounding periods per year in cell A3.
- Enter the number of years the investment is held for in cell A4.
- In cell A5, enter the formula =COMPOUND(A2, A3, A1, 0, A4).
- A2 represents the annual interest rate.
- A3 represents the number of compounding periods per year.
- A1 represents the initial investment amount.
- 0 represents any additional contributions made each period (assuming no additional contributions).
- A4 represents the number of years the investment is held for.
- The result in cell A5 will be the total value of the investment after the specified number of years, including compound interest.
Note: The COMPOUND function in Excel uses the syntax COMPOUND(rate, nper, pmt, [pv], [type]).
- rate: The interest rate for each compounding period.
- nper: The total number of compounding periods.
- pmt: The payment made each period (can be left as 0 if no additional contributions are made).
- pv: The present value or initial investment amount (can be omitted if it is 0).
- type (optional): The timing of the payment (0 for end of the period, 1 for the beginning of the period).