COMPOUND Function

Returns compound interest parameters.

Category:

Financial

Syntax

COMPOUND(a,f,r,n)

Required Arguments

a

is numeric, and specifies the initial amount.

Range

a ≥ 0

f

is numeric, and specifies the future amount (at the end of n periods).

Range

f ≥ 0

r

is numeric, and specifies the periodic interest rate expressed as a fraction.

Range

r ≥ 0

n

is an integer, and specifies the number of compounding periods.

Range

n ≥ 0

Details

The COMPOUND function returns the missing argument in the list of four arguments from a compound interest calculation. The arguments are related by the following equation:

\begin{matrix} f = a {(1 + r)}^{n} \end{matrix}

One missing argument must be provided. A compound interest parameter is then calculated from the remaining three values. No adjustment is made to convert the results to round numbers.

If n=0, then

f = a

and

{(1 + r)}^{n}

are equal to 1.

Note: If you choose r as your missing value, then COMPOUND returns an error.

Example

The accumulated value of an investment of $2000 at a nominal annual interest rate of 9 percent, compounded monthly after 30 months, can be expressed as

future=compound(2000,.,0.09/12,30);

The value returned is 2502.54. The second argument has been set to missing, indicating that the future amount is to be calculated. The 9 percent nominal annual rate has been converted to a monthly rate of 0.09/12. The rate argument is the fractional (not the percentage) interest rate per compounding period.