I understand the Excel formula for calculating the future value of an annuity
when the compounding period is the same as the deposit period, e.g., put
money in monthly and also compound monthly. But I don't understand how to
calculate how much the money will earn in the bank, because the bank
compounds daily. The problem: $2000 invested annually over 25 years at 6%
interest compounded daily equals how much future value? Another way to say
this is, how do I calculate APR? If I could calculate the APR on 6%
compounded daily, I could plug the APR into the Excel formula with an annual
deposit and come out with the right answer.
--
Marjory K

Hi Marjory,

You can use the EFFECT() and NOMINAL() functions to convert from and to APR and daily rates
Look in HELP for details (and note the remark about a possible #NAME error)

--
Kind regards,

Niek Otten
Microsoft MVP - Excel
Keep discussions in the newsgroups- no private emails please
"Marjory K" wrote in message ...
|I understand the Excel formula for calculating the future value of an annuity
| when the compounding period is the same as the deposit period, e.g., put
| money in monthly and also compound monthly. But I don't understand how to
| calculate how much the money will earn in the bank, because the bank
| compounds daily. The problem: $2000 invested annually over 25 years at 6%
| interest compounded daily equals how much future value? Another way to say
| this is, how do I calculate APR? If I could calculate the APR on 6%
| compounded daily, I could plug the APR into the Excel formula with an annual
| deposit and come out with the right answer.
| --
| Marjory K

Marjory K wrote:
I understand the Excel formula for calculating the future value of an annuity
when the compounding period is the same as the deposit period, e.g., put
money in monthly and also compound monthly. But I don't understand how to
calculate how much the money will earn in the bank, because the bank
compounds daily. The problem: $2000 invested annually over 25 years at 6%
interest compounded daily equals how much future value? Another way to say
this is, how do I calculate APR?

The APY (the term "APR" is deprecated in this context) can be estimated
as follows:

=fv(6%/365, 365, 0, -1) - 1

You might need to format that as Percentage with 2 or more decimal
places.

Thus, the future value of the annual annuity with daily compounding can
be estimated as follows:

=fv(fv(6%/365,365,0,-1)-1, 25, -2000)