calculating interest using excel

What "high high interest" account? I can't (without looking too hard) find anything from them other than the 5.51%pa/5.65%AER one.

Your formula looks OK except that I think you want 1 at the end instead of 0, and you need to replace "C3/12" with "C3*0.8/12" to take account of tax deducted at source.

You need to establish whether 5.85% is the nominal annual rate (i.e. 12 times the actual rate used for monthly interest), in which case 0.0585 would be the correct value to use for C3, or whether it is the AER, in which case (making the usual assumptions) you must compute the actual monthly rate first, by setting C3 to 1.0585^(1/12)*12-12, but you should really try to discover the actual rate they use by searching their literature, because reported AERs are generally just an approximation, and back-computing the actual rate from an AER is unsound.

If the AER is 5.85, chances are the annual rate is actually 5.70%.

Hi I already had a normal high interest account with ICICI (opened on the advice of my father) where I put my savings and was "invited" to transfer some of my savings to an account that paid out 0.2% more than the

Interest Rate (Gross annual) : 5.65%

that I already had, so I did.

I am just starting out on understanding all this savings etc but at the moment I am not looking at the long term I just want a new car in a years time and I want to enjoy my life just now and there is always the rich husband in the future :-) lol

plus living at home with your parents is also a financial advantage.

So back to rewriting my spreadsheet.

Tracy

In message , Tracy writes

For some reason that I dont understand, but which Ronald will no doubt explain, the microsoft FV function assumes the first payment is made at the end of the 1st month and therefore doesnt seem to take the interest due on the last months payment into account.

I think the difference in our clacs (apart form the different advertised rate for ICICI) is that you are using their published AER rate in your excell fomraul whereas you should be using the gross rate, which for the currently advertised AER of 5.65% is 5.51%. If you are actually getting an AER of 5.85% then Ronalds calc for a gross rate of 5.7 would be correct.

I calculate the answer by using 12 lines of the sheet, showing the compounding interest being added monthly. Mathematically inelegant I know, but at least it gives the right answer.

Bitstring , from the wonderful person John Boyle said

I beg to differ - mathematically VERY elegant because you can see WTF is going on. We probably both recall the famous O-level maths chant of 'Show your working'. 8>.

It also works good for iterative equation solving, of the sort 'what monthly interest rate do I need to turn £10/month into £1765 after 4 years'.

The key lies in the "type" argument. See below the description of the FV function provided with Linux's "gnumeric". I don't use MS excel, but the description is likely to be compatible.

[I never dreamed I would be giving advice on spreadsheets, especially to an old (very old) hand like JV, because I take the view that spreadsheets are an invention of the devil].

Synopsis

FV(rate,term,pmt,pv,type)

Description

FV computes the future value of an investment. This is based on periodic, constant payments and a constant interest rate. The interest rate per period is @rate, @term is the number of periods in an annuity, @pmt is the payment made each period, @pv is the present value and @type is when the payment is made. If @type = 1 then the payment is made at the begining of the period. If @type = 0 it is made at the end of each period.

Ah !! You learn something every day! Thank you RV.

RB, please. I can't imagine varifocals will do it for me. All this adjusting focus by tilting my head will give me backache.

You'll get used to it, we all do.