If you want to to know the return on compound interest If you are not sure what your money can produce if you put it in a deposit, you can use our calculator that will give you the amount of money generated and will also subtract the possible withholding taxes to be applied to the final amount we collect (personal income tax, for example).
For calculate the capital obtained You only have to fill in all the data in our calculator, click on the calculate button and you will automatically know the profitability obtained in the period of time you have indicated.
Example of profitability calculation
We will calculate the return on a deposit at 7% APR in which we invest a capital of 3,000 euros for 2 years.
As this is a deposit on which we apply compound interestIn the first year, the interest earned during the first year is added to the total principal to be computed in the following period, which will generate even more interest.
If you notice, in this example, during the first year our money generates €210 in interest which is added to the initial capital of €3,000. In this way, the interest for the second year is applied to the 3,210 euros, which will generate annual interest of 224.70 euros.
Logically, not everything is going to be benefits and we will have to pay the corresponding withholding taxes in concept of IRPF (18%, value that you can change in the profitability calculator in case you apply another percentage). In our example, we would pay 78.25 euros in taxes.
What is the final return on compound interest? With taxes already applied, we would be left with a capital of 3,356.45 euros, i.e. our initial 3,000 euros have increased our capital by 356.45 euros in two years.
What if instead of investing 3,000 euros we increase the amount to 15,000 euros? We invite you to use our calculator to obtain the rentability APR in this case.
Calculate profitability in Excel
If you want to calculating profitability in Excel of a compound capitalization, we must first know how it is calculated through its mathematical formula:
In this formula, we can distinguish several unknowns:
- Cnis the final capital we obtain
- Coinitial capital
- i: interest rate
- n: duration of operation
Now that we know how to calculate the return with a compound interest rateIf we want to use a mathematical formula, we must transfer this mathematical formula to Excel. To do this, we will open a new spreadsheet and use the following layout for each of the variables in the formula:
Finally, we will calculate the profitability inserting in cell E5 the formula that takes into account the values entered in cells B5, C5 and D5:
You will probably have to adapt the Excel formula to fit cell coordinates to your spreadsheet. If you have any kind of problem, leave us a comment and we will help you as soon as possible.