In this tutorial, we’ll explain how to calculate simple compound interest, reverse compound interest, and continuous compound interest with examples in Excel. Compound interest is used in various financial products such as savings accounts, certificates of deposit, bonds, and other investment vehicles. Over time, this leads to much faster growth compared to simple interest. So the next time interest is calculated, it will be based on a higher balance, and you will earn more interest. Think of it this way: if you put some money in a savings account that pays compound interest, each time you earn interest, that interest is added to your account balance. Compound Interest is a concept in finance that refers to the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. He who understands it, earns it he who doesn’t, pays it.”Ĭompound Interest may be one of the most powerful financial concepts in the world but it’s not that hard to calculate and Excel makes it even easier. Albert Einstein once said, “Compound interest is the eighth wonder of the world.
