Calculation of Interest

• May 16th 2011, 05:50 AM
dirk
Calculation of Interest
Hi all, was wondering if someone could help me in solving this formula:

I want to add a certain percentage of interest to a capital amount for a certain number of months. I don't know how to calculate the formula. remember the capital amount will be growing every month.

Example: Capital = 1000 Interest = 5% Months = 3

1000 + 5% = 1050
1050 + 5% = 1102.50
1102.50 + 5% = 1157.62

What would the formula for this be if Capital was X, Interest was Y and Months where Z?
Please guys I really want to use this formula in a Excel spreadsheet
All Help appreciated!
• May 16th 2011, 06:01 AM
e^(i*pi)
Unless I'm misunderstanding something you can use the compound interest formula:

$P(t) = P_0 \left(1+\dfrac{r}{n}\right)^{nt}$

where:
• $P_t$ = amount at time t
• $P_0$ = initial/principal
• $n$ = number of annual compounds (if you're compounding monthly it's 12)
• $r$ = annualised rate (APR)
• $t$ = time

In your case you can simplify to $P_t = P_0(1+r)^t$ - but set r to the monthly rate (5%) and t to months