Compounding in an Excel model
Download the Excel spreadsheet for the course.
- Where can you see compounding? Which exercise number or line number?
- How much has our 150 turned into at the end of 5 years?
We are starting slowly (it will get harder!) but click here if you would like to check your answers.
Click on the final cell at line 10. Here we are answering the question: “If I put my money in the bank at 7% interest rate, what would it turn into in five years’ time?” The answer of course, in this case, is 210.38.
Notice the Excel formula in cell B14. Mathematically this formula is equivalent to 150 x (1+7%)5. Notice that the “^” symbol denotes “to the power of” in Excel. In Excel “*” is the same as “x” (“multiplied by” or “times”).
Return to the advanced financial modelling course page
Now we go on to look at discounting cash flows instead of compounding. Please click to return to the advanced financial modelling course page.
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