Join Curt Frye for an in-depth discussion in this video Calculating simple interest and compound interest, part of Excel 2007: Financial Analysis.
One of the first rules you learn in business is that no one gives you money for free.…If you plan to borrow money with the goal of making a profit, you should…expect to pay interest so that the institution that loaned you money can make a profit too.…There are two main ways to calculate interest, Simple Interest and Compound Interest.…Simple Interest is calculated based on the principal, interest rate, and time only.…In other words if you pay a loan back over time, the unpaid interest doesn't…part of the principal.…As an example, take a look at the loan terms we have in this worksheet.…
We have a principal of $200,000, a rate of 6%, and a term of 5 years.…So to calculate the total payment on the loan we'll add the principal to the…principal times the rate times the term.…And we have $260,000.…You can verify that answer is correct.…6% of $200,000 is $12,000.…So you multiply that by 5, which would be $60,000, and you have a total of $260,000.…
One other scenario that uses simple interest would be in annuity that guarantees…
Author
Curt Frye
Released
8/25/2009- Building a financial worksheet with Pivot Tables
- Reviewing financial statements through common-sized balance sheets
- Calculating percentage change over time in financial statements
- Determining profitability ratios and return on investments
- Studying liquidity and activity ratios through an average collection period
- Computing the future value of an investment
Skill Level Intermediate
Duration
Views
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Introduction
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Welcome1m 8s
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Disclaimer26s
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1. Designing a Financial Worksheet
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Avoiding common mistakes5m 39s
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2. Analyzing Cash Flows Using Excel Tables and Pivot Tables
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Pivoting a Pivot Table2m 22s
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Filtering a Pivot Table3m 11s
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3. Analyzing Financial Statements
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4. Calculating Profitability Ratios
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5. Calculating Liquidity and Activity Ratios
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6. Calculating Leverage Ratios
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Calculating the equity ratio1m 26s
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Calculating the debt ratio2m 57s
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7. Calculating the Effect of Interest Rates on Loan Repayment
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8. Determining Future Cash Flows
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Calculating present value2m 29s
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9. Forecasting Future Growth
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10. Determining Amortization and Depreciation Schedules
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Introducing amortization2m 20s
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Introducing depreciation2m 1s
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11. Analyzing Bond Investments
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Calculating a bond's yield2m 15s
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Conclusion
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Goodbye23s
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Video: Calculating simple interest and compound interest