P = principal amount (the initial amount you borrow or deposit) r = annual rate of

**interest**(as a decimal) t = number of years the amount is deposited or borrowed for. A = amount of money accumulated after n years, including**interest**.Just so, what does interest compounded monthly mean?

One very important exponential equation is the

**compound**-interest formula: If interest is**compounded**yearly, then n = 1; if semi-annually, then n = 2; quarterly, then n = 4;**monthly**, then n = 12; weekly, then n = 52; daily, then n = 365; and so forth, regardless of the number of years involved.How do you work out compound interest?

**To**answer this question

**you**begin by

**working out**5% of £250 which = £12.50.

**To calculate**the amount of simple

**interest**over 5 years

**you**simply multiply the

**interest**earnt in year one by five - £12.5 × 5 = £62.5. If

**you**deposit £1,000 in a bank account which is paying 3%

**compound interest**per year.

What is the formula for compound interest in Excel?

**Compound Interest Formula in Excel**

- P is the initial amount invested;
- r is the annual interest rate (as a decimal or a percentage);
- n is the number of periods over which the investment is made.