In this next example, we use the same variables, but we’ll extend the model to 40 years instead of four.Example #8uses annual compounding and a $100 monthly contribution (calculated annually). At a5% interest rate, here’s what we get: See spreadsheetExample #8: Over the 40 years, t...
In finance,compound returnscause exponential growth. The power of compounding is one of the most powerful forces in finance. This concept allows investors to create large sums with little initial capital. Savings accounts that carry acompound interestrate are common examples of exponential growth. App...
Select theSet cell. I selected cellC8because this cell contains the formula for theEffective Interest Rate. EnterTo value. I wrote.102because the expectedEffective Interest Rateis10.2%. SelectBy changing cell. I selected cellC6because this cell contains theCompounding Periods Per Year. SelectOK. ...