Microsoft Office Tutorials and References
In Depth Information
Adds the payment amount to the running total
=IF(C6<>””,G5+D6,””) Adds the interest to the running total
Calculates the new loan balance by subtracting the principal
amount from the previous loan balance
Note that the formula in cell D6 assumes that the year has 365 days. A more precise formula uses the
YEARFRAC function, which calculates the fraction of a year when a leap year is involved:
This workbook is available at this book's website. The file name is irregular pay-
Investment Calculations
Investment calculations involve calculating interest on fixed-rate investments, such as bank savings accounts,
CDs, and annuities. You can make these interest calculations for investments that consist of a single deposit or
multiple deposits.
This book's website contains a workbook with all the interest calculation examples in
this section. The file is named investment calculations.xlsx.
Future value of a single deposit
Many investments consist of a single deposit that earns interest over the term of the investment. This section de-
scribes calculations for simple interest and compound interest.
Calculating simple interest
Simple interest refers to the fact that interest payments are not compounded. The basic formula for computing
interest is
For example, suppose that you deposit $1,000 into a bank CD that pays a 3% simple annual interest rate. After
one year, the CD matures, and you withdraw your money. The bank adds $30, and you walk away with $1,030.
In this case, the interest earned is calculated by multiplying the principal ($1,000) by the interest rate (0.03) by
the term (one year).
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