M = number of times per period (typically months) the interest is compounded The general equation to calculate compound interest is as follows The formula to calculate intra-year compound interest with the EFFECT worksheet function is as follows: The EFFECT function returns the compounded interest rate based on the annual interest rate and the number of compounding periods per year. Microsoft Excel includes the EFFECT function in the Analysis ToolPak add-in for versions older than 2003. Financial institutions may calculate interest on bases of semiannual, quarterly, monthly, weekly, or even daily time periods. Intra-year compound interest is interest that is compounded more frequently than once a year. This article discusses intra-year calculations for compound interest.įor additional information about annual compounding, view the following article:įV function Calculating Future Value of Intra-Year Compound Interest Three types of compounding areĪnnual, intra-year, and annuity compounding. The future value of a dollar amount, commonly called the compounded value, involves the application of compound interest to a present value amount.
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