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how to compound monthly interest. We will use the FV excel formula to calculate compound interest. Either way you earn appropriate interest for the portion of month for the balance you had at the end of each day.
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For monthly compounding the periodic interest rate is simply the annual rate divided by 12 because there are 12 months or periods during the year. A the future value of the investmentloan including interest. In the first year the interest rate of 10 is calculated only from the 10000 principal.
The argument in the FV function is.
Compound interest is the total amount of interest earned over a period of time taking into account both the interest on the money you invest this is called simple interest and the interest earned or charged on the interest youve previously earned. Compound interest is interest calculated on the original principal plus interest calculated on the accumulated interest from previous accounting periods. You need the beginning value interest rate and number of periods in years. Either way you earn appropriate interest for the portion of month for the balance you had at the end of each day.
