Calculate Compound Interest on defaulted loan

[drffc]

I am doing a collection on an old loan.

There were never any payments.

Initial loan amount: $7,559.95.

Annual interest: 9%, compounded annually.

Loan date: 03/24/1994.

I just need to calculate the value of the accumulated interest (compounded annually) through to today.

I'm basically an Excel newbie, so I'd appreciate simple solutions and terms.

Many thanks!

[benjuk]

Hi Drffc

The simplest way as a beginner would be to use the function wizard to insert a PMT function. This calculates compound interest and is mainly used for mortgages. As for getting to start back in 1994 I do not know, but as that was 19 years ago, simply set the function to base it on a 19 year term. I can upload an example later after work if you have not been able to solve it.

Ben

[dilipandey]

Hi drffc,

welcome to the forum.
See the below link from Micorosft :-

http://support.microsoft.com/kb/141695?wa=wsignin1.0



Regards,
DILIPandey
<click on below * if this helps>

[drffc]

@ benjuk
Thank you. I would appreciate it if you could upload your example!

[MoneyMaker]

I am doing a collection on an old loan.

There were never any payments.

Initial loan amount: $7,559.95.

Annual interest: 9%, compounded annually.

Loan date: 03/24/1994.

I just need to calculate the value of the accumulated interest (compounded annually) through to today.

I'm basically an Excel newbie, so I'd appreciate simple solutions and terms.

Many thanks!

Hello drffc

Excel offers a CUMIPMT function that finds cumulative interest payment of a loan between two periods yet it does not allow for fraction of periods.

Thus we will make use of FV function that will provide an answer of compound amount meaning how much a loan in amount of $7, 559.95 is worth as of today.

But this is unrealistic as it does not account for inflation, for a real worth of the loan as of today that considers the effect of inflation you would have to make use of 3rd party Excel FV function that permits entry for inflation rate along with interest rate.

Now if we didn't have access to 3rd party Excel FV function called tadFV we will try Excel's own FV function as follows

=FV(9%, (TODAY()-DATE(1994, 3, 24))/365, 0, -7559.95, 0)
$40,016.09

Thus a loan of $7,559.95 issued on 03/24/1994 is worth $40,016.09 as of 07/20/2013 given that inflation was at 0%