Annual Compound Interest Schedule

Explanation

If you have an annual interest rate, and a starting balance you can calculate interest with:

=balance * rate

and the ending balance with:

=balance+(balance*rate)

So, for each period in the example, we use this formula copied down the table:

=C5+(C5*rate)

With the FV function

The FV function can also be used to calculate future value. The equivalent formula is:

=FV(rate,1,0,-C5)

The interest rate is used as-is, since we are compounding annually, nper is 1, since there is only one period per year, pmt is zero, since there are no additional payments, and pv is the starting balance, input as a negative value by convention.

Explanation

An annuity is a series of equal cash flows, spaced equally in time. The goal in this example is to have $100,000 at the end of 10 years, with an annual payment of $7,500 made at the end of each year. What interest rate is required?

To solve for the interest rate, the RATE function is configured like this in cell C9:

=RATE(C7,-C6,C4,C5)

nper - from cell C7, 10. pmt - from cell -C6, -7500 pv - from cell C4, 0. fv - from cell C5, 100000

With this information, the RATE function returns 0.0624. When a percentage number format is applied, the result displays as 6.24%. Note payment is negative because it represents a cash outflow.