Excel for Chartered Accountant: Interest Formula

by ANIL NAHAR

People often use spreadsheets to track a variety of financial information, such as the value of investment portfolios, loan obligations, income, and expenditures. Money is earned on sums invested in savings accounts, certificates of deposit (CD’s), and money market funds. Borrowers pay for the use of money they have borrowed for school loans, mortgages, car payments, or credit card purchases. This charge for money is called interest.
Usually this fee is given as a rate of interest which is then is multiplied by the principal value to calculate the interest fee amount. The principal is the current value of the financial instrument, either a loan or investment. In a finance course, how these interest rates are set is of major import, as well as understanding the time value of money (what you expect to be paid for use of your money) and risk (the uncertainty of getting this money back from the borrower).
In this book we will study how to calculate the effects of applying an interest rate to monies both lent and invested using some Excel tools known as Financial Functions. To do so, let’s first look at how interest is calculated.

29 pages, Kindle Edition

Published February 22, 2019