Calculate Compound Interest in Google Sheets

The post shows how to determine the future value of an investment using the annual compound interest schedule formula in Google Sheets and includes examples of how to do it using yearly, monthly, or daily compounding interest rates. Additionally, you’ll get thorough instructions for creating your own google spreadsheet compound interest calculator.

Compound interest is a fundamental tenet of finance and one of the most powerful financial forces at work, determining the result of your investments.

Unless you are a graduate of accounting, a financial analyst, or an experienced investor, it may be difficult to comprehend the notion included in specialist financial books and manuals. The purpose of this essay is to simplify. Additionally, you will learn how to calculate Compound Interest in google sheets.

Calculate Compound Interest google sheets1

What is compound interest?

Compound interest, in the simplest definition, is interest gained on interest. Compound interest is generated on both the original investment (principal) and the interest collected over time.

Perhaps it is simpler to begin with basic interest, which is computed on the principal amount alone.

Calculate Compound Interest google sheets1

For example, suppose you deposit $20 into a bank account. How much would your deposit be worth after a year at a rate of 5% yearly interest? It should be 21.4. (20 + 20*0.05 = 21), and your interest earned is $1.

In the case of compound interest, the principle is different for each time period. The bank will not return the interest earned; instead, it will be added to your main investment. This increased principle amount becomes the principal for the next time period and earns interest as well. you earn interest on both the principle and the interest gained during each compounding period.

In our case, in addition to the $20 capital, the $1 earned interest will accrue interest the next year. Thus, how much would your $20 investment be worth after two years at a compounded annual interest rate of 5%? It is 22.05 (21 + 21*0.05 = 22.05), and your interest earned is $2.05.

Calculate Compound Interest google sheets1

There are various methods for calculating compound interest in google sheets, and we will cover each in depth.

Compound interest calculation in google sheets

Long-term investing may be an efficient way to build wealth, and even tiny amounts can add up over time. The following google sheets compound interest calculations will assist you in putting the savings plan into action. Eventually, we’ll develop an uniform method for calculating the future value for various compounding periods – daily, weekly, monthly, quarterly, or annual.

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

In google sheets, a more efficient method of computing compound interest is to use the general interest formula:

FV = PV(1+r)^n

Where FV denotes future value, PV is current value, r denotes the period-to-period interest rate, and n denotes the number of compounding periods.

Consider investing $5,000 at a 10% annual interest rate compounded semi-annually and calculating the worth of your investment after five years. The spreadsheet below demonstrates how to do this computation in google sheets.

Calculate Compound Interest google sheets1

Calculating annual compound interest in google sheets

To help you grasp the concept of compound interest, let’s revisit the very basic example given at the start of this course and create an google sheets formula to compute yearly compound interest. Assume that you are investing $10000 at a 10% annual interest rate and are curious in how annual compounding boosts your money.

Calculate Compound Interest google sheets1

Annual Compound Interest Calculator

To calculate annual compound interest, just add the previous year’s interest to the next year’s principle amount.

Additionally, the google sheets formula for annual compound interest will be included.

=Principal Amount*((1+Annual Interest Rate/1)(Number of Years Invested*1)))

Calculate Compound Interest google sheets1

The first year, you will get $10000*10 percent, which equals $1000; the second year, you will receive ($10000+$1000)*10 percent, which is $1100; and so on. After 5 years, you should receive about $16105.

Formula for Quarterly Compound Interest

Calculating compound interest on a quarterly basis is identical to calculating compound interest on an annual basis.

However, in this case, interest must be calculated four times a year.

Each quarter’s interest will be added to the next quarter’s principal.

To compute quarterly compound interest, use the formula below.

=Principal Amount*((1+Annual Interest Rate/4)(Number of Years Invested*4)))

Calculate Compound Interest google sheets1

With a Principal amount of $10000 and a ten percent interest rate for five years, we will get $16386.

In the first quarter, we earn 10000*(10% /4) = $250; in the second quarter, we get ($10000+$250)*(10% /4) = $256; and so on for twenty quarters (5 years).

Formula for Monthly Compound Interest

When computing compound interest on a monthly basis, you must apply the same premise as you used for prior time periods.

At the conclusion of each month, you must compute the interest. Additionally, this approach divides the interest rate by 12 to get a monthly interest rate.

In google sheets, you can use the following formula to compute monthly compound interest.

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

Calculate Compound Interest google sheets1

With a principle amount of $10000 and a ten percent interest rate for five years, we will get $16453.

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

Formula for Daily Compound Interest

Again, we must utilize the same procedure using the following calculation formula for computing daily compound interest.

Divide the interest rate by 365 to get the daily interest rate. Thus, you may compute daily compound interest using the method below.

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

Calculate Compound Interest google sheets1

With a principle amount of $10000 and a ten percent interest rate for five years, we will get $16486.

On the first day, we receive 10000*(10% /365), which equals $4; on the second day, we get ($10000+$4)*(10% /365), which equals $4; and so on for the next five years.

 

 

Related Posts

Calculate Number of Hours between Two Times

Calculating the difference between two times might be a valuable statistic for subsequent computations or averages, whether you're producing a time sheet for staff or recording personal exercises. While Excel has a plethora of complex functions, including date and time ...

Calculate Loan Interest in Given Year

When you borrow money, you are supposed to repay it gradually. Lenders, on the other hand, want to be compensated for their services and the risk they incur by lending you money. That is, you will not just repay the ...

Calculate Interest Rate for Loan

The interest rate is the fee charged by a lender to a borrower and is expressed as a percentage of the principal—the lent amount. The interest rate on a loan is often expressed as an annual percentage rate, abbreviated as ...

Calculate Interest for Given Period

Using the IPMT function in Excel, we can compute the interest payment on any loan. This step-by-step tutorial will guide Excel users of all skill levels through the process to calculate interest for given period. Finally, the formula: =IPMT(B3/12,1,B5,-B2) The ...

How To Use Excel GCD Function

This post will guide you how to use Excel GCD function with syntax and examples in Microsoft excel. Description The Excel GCD function Returns the greatest common divisor of two or more integers. So you can use the GCD function ...

Calculate A Ratio From Two Numbers In Excel

In elementary mathematics, a ratio is a connection or comparison between two or more integers. For example, ratios are often expressed as ":" to demonstrate the relationship between two numbers. You would think that manually calculating a ratio from two ...

How To Use Excel RRI Function

This post will guide you how to use Excel RRI function with syntax and examples in Microsoft excel. Description The Excel RRI function Returns an equivalent interest rate for the growth of an investment. So you can use the RRI ...

CAGR Formula Examples in Excel

CAGR in Excel is a formula that calculates the compound annual growth rate for any invested amount over the specified years or timeframe. Although there is no direct function in Excel that can help us identify the CAGR value, there ...

Build Hyperlink With VLOOKUP in Excel

You might have come across a task in which you were assigned to build hyperlinks, which seems very easy, and if you are new to excel or don't have enough experience with it, then you might wonder about doing this ...

Break ties with helper COUNTIF and column

Suppose you got a task to adjust the values that contain the ties; what would be your first attempt to break the ties of the given value? If you are wondering about doing this task manually, let me add that ...

Sidebar