Jake said:
In Excel, the principal is in A1 and the amount of
interest paid in one year is in A2.
Interest is calculated and added to the account daily
and the number of interest periods (365) is in A3
How do I calculate in A4 the rate of compound interest
on the account?
Use either of the following equivalent formulas to compute the __daily__
interest rate:
=RATE(365,0,-A1,A1+A2)
or
=(1+A2/A1)^(1/365)-1
formatted as Percentage.
The RATE expression usually works. But sometimes, RATE returns a #NUM
error, indicating that it requires a "guess" parameter. Since it is usually
difficult to guess, the second formula is more reliable.
However, interest is usually stated as an __annual__ rate. So the daily
rate should be "annualized".
In the US, the annual "interest" rate (not APY) is stated as a "simple"
rate. So multiply the formula in A4 by 365.
In the EU and UK (and perhaps elsewhere), the annual rate is a "compound"
rate. Although that can be calculated from the daily rate, in your case it
is simply A2/A1, formatted as Percentage.
The latter is also the APY in the US.
