The formula for compound interest is P 1 rnnt where P is the initial principal balance r is the interest rate n is the number of times interest is compounded per time period and t is the number of time periods. Compound interest is the addition of interest to the principal sum of a loan or deposit or we can say interest on interest. R Annual Nominal Interest Rate as a decimal.
A P 1 r m m t 3500 1 0015 4 4 2 360639.
For example if you invest 100 for 5 years at an with interest paid annually at rate of 4 the future value of this investment can be calculated by typing the following formula into any Excel cell. The formula now becomes. N is the number of times that interest is compounded per unit t for example if interest is compounded monthly and t is in years then the value of n would be 12. Compound interest is the product of the initial principal amount by one plus the annual interest rate raised to the number of compounded periods minus one.