How to calculate compound interest?

Question

If I plan to deposit a fixed amount at the beginning of each year in the bank for 20 years, how do i calculate the compound interest?

$5,000 deposit per year.

5% per year interest rate.

Assume I earn constant interest rate on my money and that interest is paid at the end of the year.

Answer 1

To set up an excel spreadsheet:

               Beginning                 Ending

Year        Amount  + Deposit  X Rate  =   Amount

1 0.00    5,000 1.05 5,250.00

2 5,250.00    5,000 1.05 10,762.50

3 10,762.50    5,000 1.05 16,550.63

4 16,550.63    5,000 1.05 22,628.16

5 22,628.16    5,000 1.05 29,009.56

6 29,009.56    5,000 1.05 35,710.04

7 35,710.04    5,000 1.05 42,745.54

8 42,745.54    5,000 1.05 50,132.82

9 50,132.82    5,000 1.05 57,889.46

10 57,889.43    5,000 1.05 66,033.94

11 66,033.94    5,000 1.05 74,585.63

12 74,585.63     5,000 1.05 83,564.91

13 83,564.91    5,000 1.05 92,993.16

14 92,993.16    5,000 1.05 102,892.82

15           102,892.82     5,000 1.05 113,287.46

16 113,287.46   5,000 1.05 124,201.83

17 124,201.83   5,000 1.05 135,661.92

18 135,661.92   5,000 1.05 147,695.02

19 147,695.02   5,000 1.05 160,329.77

20 160,329.77   5,000 1.05 173,596.60

The rate is 1.05 since by adding 1 to the rate you do not need to add back the opening balance to the interest calculation to get the ending balance

Answer 2

find a computer program that will do it for you. I am good at math, but that is still tricky. Type compound interest in your search bar.