Help with excel formula
I want to create a formula which shows daily compounding in excel. Let's say we start with $100, earning an APR of 20%. Compounding daily.
Is my formula correct?
$100 * (1+(20%/365))^number of days
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Yes.
Google would've been quicker
No, it isn't correct. I think you're conflating two concept. What I think you mean is that 20% is the APY (i.e. I put in $100 today, and I get $120 in 1 year based on daily compounding) and I need to show how that compounds day-by-day.
You can show in XLS that the original formula isn't correct based on .
First, you need to calculate the periodic (i.e. daily) rate. Probably easier for you to look up how to calculate this rather than me type out formulas in the format, but it should come out at around 18.2%
Second, make yourself a list in XLS with 365 rows. In row 1, you put the formula you suggested, only you use this periodic rate rather than 20%
Good luck with the task and hope this explanation makes sense
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