Understanding Compound Interest
Compound interest allows you to earn interest on both the initial investment (the principal) and any previously earned interest.
The generic formula for compound interest is:
Where:
 (FV) is the future value
 (PV) is the present value (initial investment)
 (r) is the interest rate per period
 (n) is the number of compounding periods
Using Excelâ€™s FV Function
Excel has a builtin function calledÂ FV
that calculates the future value of an investment using a constant interest rate.
The syntax of theÂ FVÂ function is: FV(rate, nper, pmt, [pv], [type]).
 rate: The interest rate per period
 nper: The total number of periods
 pmt: Additional payments (usually 0 for compound interest)
 pv: The present value (negative for investments)
 type: Optional; 0 for endofperiod payments, 1 for beginningofperiod payments
Example Calculation
Letâ€™s assume a $5,000 investment for ten years at a 5% annual interest rate, compounded monthly.
We can use the following formula:
=FV(C5/C6,C7*C6,0,C8)
Here, C5Â represents the interest rate, C6Â is the compounding periods per year, C7Â is the terms in the year, and C8Â is the present value of the investment.
Quarterly Compound Interest Formula
To calculate quarterly compound interest, we compute interest four times a year. Each quarterâ€™s interest is added to the principal for the upcoming quarter.
The formula is:
Creating the Calculator in Excel:
Step 1 – Dataset Introduction
Consider a dataset with a principal amount of $10,000, an annual interest rate of 5%, and a total investment period of 10 years.
Step 2 – Inserting the Formula
 In cell C9 (your resulting cell), enter the formula:
=C5*((1+C6/4)^(C7*4))
Here:

 C5: Principal amount
 C6: Annual interest rate
 C7: Total years of investment
 Press Enter.
Step 3 – Final Output
 Press Enter, and cell C9 will display the future amount (quarterly compound interest), which in this case is $12,820.
Read More: A Daily Compound Interest Calculator in Excel (Template Attached)
Step 4 – Customizing Values
Modify the input values (e.g., change the total years of investment) to see how the result changes.
Read More: Reverse Compound Interest Calculator in Excel (Download for Free)
Download Practice Workbook
You can download the practice workbook from here:
Related Articles
 Create a Daily Loan Interest Calculator in Excel
 Bank Interest Calculator in Excel Sheet â€“ Download Free Template
 How to Develop CD Interest Calculator in Excel
 How to Create SIP Interest Calculator in Excel
 How to Generate Overdraft Interest Calculator in Excel
<< Go Back to Finance Template  Excel Templates
Get FREE Advanced Excel Exercises with Solutions!
I am confused at your notation for quarterly compounding! FV= p*(1+ APR/4)*(#years*4)
FV = C5*(1+C6/4)*(C7*4)
(# Years * 4) or (C7*4) should be an EXPONENT,NOT a factor! FV=p*(1+APR/4)^(C7*4)
FV=C5*(1+C6/4)^(C7*4)
This could cause much confusion!
Bob Martray
Math Instructor at NVCC
5712768325
Hello, BOB MARTRAY!
Thanks for noticing.
The formula is now updated!