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Thread: Bank Account Formula (Any)

20040816, 21:46 #1
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Bank Account Formula (Any)
How do I calculate simple interest that a savings account would accrue? All I can easily find is ways to calculate Loan Payments  not a simple savings account.
For example, I just want a formula that would take $10,000 in a bank account with an annual interest rate of 5%, then have it determine the future value at different points  say 6 months, 12 months, two years, etc.
Maybe I am making this too complicated or looking for a complicated formula when a simple formula is all that is needed! However, I have looked through the Excel functions and I did not easily find one that fits the bill!
Help an idiot out. Thanks. ;]

20040816, 21:56 #2
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Re: Bank Account Formula (Any)
You use the same functions for a savings account as for a loan. In this case, the FV (future value) function with a payment of 0. See attached workbook.

20040817, 00:55 #3
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Re: Bank Account Formula (Any)
Thank you, sir. Now, how would I do that to make it "compouned monthly"? I believe your formula is showing it compounded semiannually, but I believe banks compound monthly  or something, correct?
EDIT:
OK, I guess the formula is here.
But... is that formula in Excel's formula list, or do I have to enter it like you did??

20040817, 01:12 #4
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Re: Bank Account Formula (Any)
=FV(5%/12,6,0,10000) for 6 months
=FV(5%/12,12,0,10000) for 12 months, etc
Or to use Hans' Setup
=FV($B$2/12,A7,0,$B$1)
and copy it down:
Where A7 is 6, A8 is 12, etc, to get 6 mons, 12 months, etc
Steve
Concerning the formula you found, the FV should calculate the same Value
=10000*(1+5%/12)^6
for 6 months
=10000*(1+5%/12)^12
for 12 months

20040817, 01:15 #5
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Re: Bank Account Formula (Any)
Just change the 6 month interest rate to the monthly rate.
Legare Coleman

20040817, 17:41 #6
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Re: Bank Account Formula (Any)
In the U.S. banks usually have to quote a "Rate" and a "Yield". The relationship between the two is determined by the compounding frequency.
If you have 5% rate compounded monthly, your yield is (1+.05/12)^121=5.116%. Your 1,000 deposit will be 1051.16 at the end of the year.
If you have 5% rate compounded daily, your yield is (1+.05/365)^3651=5.127%. Your 1,000 deposit will be 1051.27 at the end of the year.

20040817, 18:32 #7
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Re: Bank Account Formula (Any)
I believe that he asked for a 5% rate compounded monthly which is what I calculated. My result is the same as yours if I change the $10,000 he asked for to the $1,000 you used in your calculation. If he had asked for 5% compounded daily, I would have changed the formula in cell B3 to =B2/365. That would have given the same result as your second formula if I also changed the $10,000 to $1,000.
So, I am not sure what you are saying.Legare Coleman

20040817, 20:05 #8
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Re: Bank Account Formula (Any)
I responded to the wrong post since I view threads in flat mode. I was just trying to shed some light on what compounding means since the original poster seemed a little hazy on the term.