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Compound interest calculation

  1. #1
    Ira Hayes
    Guest

    Compound interest calculation

    I think my bank has been underpaying me interest on a 5 year certificate of
    deposit.

    How can I calculate the interest I should be getting on, say, $2,500 for a
    five year term at 6.77% and show how much interest accrues at year one, year
    two, etc.?

    Ike



  2. #2
    RagDyeR
    Guest

    Re: Compound interest calculation

    Would you care to share the name of the institution that's providing that
    *very* good interest rate?<g>
    --

    Regards,

    RD
    --------------------------------------------------------------------
    Please keep all correspondence within the Group, so all may benefit !
    --------------------------------------------------------------------

    "Ira Hayes" <[email protected]> wrote in message
    news:[email protected]...
    I think my bank has been underpaying me interest on a 5 year certificate of
    deposit.

    How can I calculate the interest I should be getting on, say, $2,500 for a
    five year term at 6.77% and show how much interest accrues at year one, year
    two, etc.?

    Ike




  3. #3
    Ira Hayes
    Guest

    Re: Compound interest calculation

    The CD is 5 years old at this point and maturing soon-- so that rate is long
    gone!

    Ike


    "RagDyeR" <[email protected]> wrote in message
    news:OzPeexK%[email protected]...
    > Would you care to share the name of the institution that's providing that
    > *very* good interest rate?<g>
    > --
    >
    > Regards,
    >
    > RD
    > --------------------------------------------------------------------
    > Please keep all correspondence within the Group, so all may benefit !
    > --------------------------------------------------------------------
    >
    > "Ira Hayes" <[email protected]> wrote in message
    > news:[email protected]...
    > I think my bank has been underpaying me interest on a 5 year certificate
    > of
    > deposit.
    >
    > How can I calculate the interest I should be getting on, say, $2,500 for a
    > five year term at 6.77% and show how much interest accrues at year one,
    > year
    > two, etc.?
    >
    > Ike
    >
    >
    >




  4. #4
    JE McGimpsey
    Guest

    Re: Compound interest calculation

    One way:

    Assuming yearly interest payments:

    =FV(6.77%,n,0,-2500)-FV(6.77%,(n-1),0,-2500)

    where n is the year.

    If interest is compounded more frequently, adjust the interest rate and
    term accordingly. For instance, with quarterly compounding:

    =FV(6.77%/4, n*4, 0, -2500) - FV(6.77%/4, (n-1)*4, 0, -2500)




    In article <[email protected]>,
    "Ira Hayes" <[email protected]> wrote:

    > I think my bank has been underpaying me interest on a 5 year certificate of
    > deposit.
    >
    > How can I calculate the interest I should be getting on, say, $2,500 for a
    > five year term at 6.77% and show how much interest accrues at year one, year
    > two, etc.?
    >
    > Ike


  5. #5
    Ira Hayes
    Guest

    Re: Compound interest calculation

    "JE McGimpsey" <[email protected]> wrote in message
    news:[email protected]...

    >
    > In article <[email protected]>,
    > "Ira Hayes" <[email protected]> wrote:
    >
    >> I think my bank has been underpaying me interest on a 5 year certificate
    >> of
    >> deposit.
    >>
    >> How can I calculate the interest I should be getting on, say, $2,500 for
    >> a
    >> five year term at 6.77% and show how much interest accrues at year one,
    >> year
    >> two, etc.?
    >>
    >> Ike


    Thanks for the response.

    I guess I'm just a dumb Excel newbie but I plugged that formula into a cell
    and it returns #NAME?

    So what am I doing wrong?

    Ike



  6. #6
    NewsMan
    Guest

    Re: Compound interest calculation

    Ira Hayes wrote:
    > I think my bank has been underpaying me interest on a 5 year certificate of
    > deposit.
    >
    > How can I calculate the interest I should be getting on, say, $2,500 for a
    > five year term at 6.77% and show how much interest accrues at year one, year
    > two, etc.?
    >
    > Ike
    >
    >


    First, I am assuming CD is calculate using compound interest, not simple
    interest.

    Here is the simple answer. The formual for compound interest is:

    A=(P+R)^n where A=future amount P=original principal R=rate
    n=compounding period. eg at year 1 n= and your formula is
    (2500*.0677)^1= 2669.25, year 2 = (2669.25*.0677)^2, and so on.

    Your answer is:

    Year principal rate interest future
    earned amount
    1 $2,500.00 0.0677 $169.25 $2,669.25
    2 $2,669.25 0.0677 $180.71 $2,849.96
    3 $2,849.96 0.0677 $192.94 $3,042.90
    4 $3,042.90 0.0677 $206.00 $3,248.90
    5 $3,248.90 0.0677 $219.95 $3,468.86


    if the CD is based on simple interest, you interest is $169.25 each year.

  7. #7
    Peo Sjoblom
    Guest

    Re: Compound interest calculation

    Replace the n with the year


    Regards,

    Peo Sjoblom

    "Ira Hayes" wrote:

    > "JE McGimpsey" <[email protected]> wrote in message
    > news:[email protected]...
    >
    > >
    > > In article <[email protected]>,
    > > "Ira Hayes" <[email protected]> wrote:
    > >
    > >> I think my bank has been underpaying me interest on a 5 year certificate
    > >> of
    > >> deposit.
    > >>
    > >> How can I calculate the interest I should be getting on, say, $2,500 for
    > >> a
    > >> five year term at 6.77% and show how much interest accrues at year one,
    > >> year
    > >> two, etc.?
    > >>
    > >> Ike

    >
    > Thanks for the response.
    >
    > I guess I'm just a dumb Excel newbie but I plugged that formula into a cell
    > and it returns #NAME?
    >
    > So what am I doing wrong?
    >
    > Ike
    >
    >
    >


  8. #8
    Ira Hayes
    Guest

    Re: Compound interest calculation

    Thanks!

    Ike
    "Peo Sjoblom" <[email protected]> wrote in message
    news:[email protected]...
    > Replace the n with the year
    >
    >
    > Regards,
    >
    > Peo Sjoblom
    >
    > "Ira Hayes" wrote:
    >
    >> "JE McGimpsey" <[email protected]> wrote in message
    >> news:[email protected]...
    >>
    >> >
    >> > In article <[email protected]>,
    >> > "Ira Hayes" <[email protected]> wrote:
    >> >
    >> >> I think my bank has been underpaying me interest on a 5 year
    >> >> certificate
    >> >> of
    >> >> deposit.
    >> >>
    >> >> How can I calculate the interest I should be getting on, say, $2,500
    >> >> for
    >> >> a
    >> >> five year term at 6.77% and show how much interest accrues at year
    >> >> one,
    >> >> year
    >> >> two, etc.?
    >> >>
    >> >> Ike

    >>
    >> Thanks for the response.
    >>
    >> I guess I'm just a dumb Excel newbie but I plugged that formula into a
    >> cell
    >> and it returns #NAME?
    >>
    >> So what am I doing wrong?
    >>
    >> Ike
    >>
    >>
    >>




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