How to calculate compound interest in Excel
With compound interest, each year’s interest is added on and then earns interest itself. After some years, the value is start × (1 + rate) ^ years.
FV does the same, and can also add a regular deposit each period.
The formula
| A | B | C | |
|---|---|---|---|
| 1 | Start | Rate | Years |
| 2 | 10,000 | 5% | 10 |
=A2*(1+B2)^C2Result: 16,288.95
10,000 growing at 5% a year for 10 years becomes about 16,288.95.
Step by step
- Type =A2*(1+B2)^C2.
- Press Enter.
Other ways to write it
=FV(B2,C2,0,-A2)FV with no regular payment gives the same answer.
Each of these gives the same result on the example above, in Excel and in Cellwise.
Common mistakes
- Simple interest by mistake
- A2*(1+B2*C2) adds the same interest every year, which understates the growth.
- Forgetting the 1
- A2*B2^C2 multiplies small percentages together and shrinks the value instead of growing it.
Reading isn’t the same as doing
Savings and compound growth gives you real tasks on this, and tests your formulas on data you haven’t seen. It’s free, with no sign-up.