How to Calculate Compound Interest in Google Sheets

To calculate compound interest in Google Sheets, you can use the FV (Future Value) function. The FV function calculates the future value of an investment based on periodic, constant payments with a constant interest rate.

Here's a step-by-step guide on how to use the FV function to calculate compound interest in Google Sheets:

1. Open a new Google Sheets document.
2. In cell A1, type "Principal".
3. In cell A2, type "Annual Interest Rate".
4. In cell A3, type "Number of Compounding Periods per Year".
5. In cell A4, type "Number of Years".
6. In cell B1, enter the principal amount of the investment.
7. In cell B2, enter the annual interest rate as a decimal (e.g., 0.05 for 5%).
8. In cell B3, enter the number of compounding periods per year (e.g., 12 for monthly compounding).
9. In cell B4, enter the number of years the investment will be held.

Example

Let's say you invest $1,000 (Principal) at an annual interest rate of 5% compounded monthly (12 compounding periods per year) for 2 years. In this example, the values in each cell will be as follows:

• B1: 1000
• B2: 0.05
• B3: 12
• B4: 2

Now, let's calculate the compound interest using the FV function.

1. Click on cell B6 to make it the active cell.
2. Type the following formula: =FV(B2/B3, B3*B4, 0, -B1)

This formula breaks down as follows:

• B2/B3: Calculates the interest rate per compounding period (annual interest rate divided by the number of compounding periods per year).
• B3*B4: Calculates the total number of compounding periods (number of compounding periods per year multiplied by the number of years).
• 0: Indicates that there are no additional periodic payments.
• -B1: Represents the initial principal amount as a negative value (to show that it is an outgoing payment).

3. Press Enter to calculate the Future Value of the investment.
4. The value displayed in cell B6 is the future value of the investment, including the principal and the compound interest earned.
5. To calculate only the compound interest earned, type the following formula in cell B7: =B6-B1
6. Press Enter to calculate the compound interest earned over the investment period.

In this example, the future value of the investment (cell B6) would be $1,104.94, and the compound interest earned (cell B7) would be $104.94.