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#1
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What is the formula for compounding interest with annual additions
Would appreciate help with learning the formula for how to compound interest
with annual additions. I would like to know the future value of an interest bearing account starting with a certain principle and adding annual additions such as one does with a 401K. I know the formula for future value without additions but not the one including annual additions. |
#2
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What is the formula for compounding interest with annual additions
The FV() function (future value) will return the future value of a stream of
EQUAL payments and has an optional argument for present value. If you are going to assume payments of varying amounts, then your best bet is to create a table with contribution dates and amounts, and apply a compounding formula to each contribution based on the # of annual periods from the date of contribution to the "maturity" date. The compounding formula is simply Contribution amount * (1+int rate)^ (# periods) So, if A1 contains the contribution amount, and the interest rate is 7.5%, invested for 15 years, the formula would be =A1*(1+.075)^15 Compound each of your contributions, then sum all the compounded values. "charrismd" wrote: Would appreciate help with learning the formula for how to compound interest with annual additions. I would like to know the future value of an interest bearing account starting with a certain principle and adding annual additions such as one does with a 401K. I know the formula for future value without additions but not the one including annual additions. |
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