For a single lump sum, type =principal*(1+rate)^years into a cell. For growth with regular deposits, use =FV(rate, nper, pmt, pv), and in both cases make the rate and the number of periods match how often interest compounds: monthly means the rate divided by 12 and the years multiplied by 12.
Compound interest is interest paid on the original amount plus the interest already added, which CFI sums up as interest on interest. CFI lists four parts to it: the principal, the interest rate, how often it compounds (monthly, quarterly or yearly) and the time horizon. It calls time the single most important of the four, and the example below shows why.
The plain formula for one lump sum
If you're putting in one amount and leaving it, you don't need a function. Microsoft's POWER page says you can use the ^ operator to raise a number to a power, as in 5^2, and that's all compound growth needs. The formula =principal*(1+rate)^years is standard arithmetic built on that operator, not a formula Microsoft publishes itself.
Try it with CFI's example. Sam puts $10,000 into a high-interest savings account at age 20 and leaves it until 60, compounding yearly at 5%. In a cell, type =10000*(1+5%)^40. CFI says the account ends up worth about $70,000, a seven-fold increase, with no further deposits (US dollars as of October 2026). My own check of the arithmetic gives a little over 70,400, which fits CFI's rounding.
The catch: a slip in the source example
If you read CFI's page yourself, you'll see it says the interest compounds yearly "at a rate of 5% per month". That's a slip. At 5% a month the result would be enormous, nowhere near $70,000. The numbers only work at 5% a year, so that's how I've used them here.
It's a useful reminder of the most common compound interest mistake in Excel: mixing up the period. A rate and a time count that don't match will give you a confident answer that's wildly wrong.
The FV function for regular deposits
When you add to the pot on a regular schedule, use FV. Microsoft says it returns the future value of an investment based on periodic, constant payments and a constant interest rate. The syntax is FV(rate, nper, pmt, pv, type), where pv and type are optional. CFI notes that pmt and pv are both optional too, but you have to give at least one of them.
| Argument | What to enter |
|---|---|
| rate | The interest rate per period, so the annual rate divided by 12 for monthly |
| nper | The total number of payment periods, so years x 12 for monthly |
| pmt | The amount you add each period, as a negative number |
| pv | Any starting balance, also as a negative number |
| type | 0 or blank for deposits at the end of each period, 1 for the start |
These are two of Microsoft's own examples, in US dollars as of October 2026. With a 12% annual rate and 12 monthly deposits of -1000, =FV(A2/12, A3, A4) returns $12,682.50. With a 6% annual rate, 10 deposits of -200, a starting balance of -500 and deposits at the start of each period, =FV(A2/12, A3, A4, A5, A6) returns $2,581.40.
CFI's version of a savings plan: $10,000 already in savings at 5%, plus $2,000 added each month for 12 months, with the monthly contribution entered as -2,000. CFI says FV suits low-risk investments with fixed rates, such as certificates of deposit or fixed-rate annuities.
Three rules that stop FV going wrong
- Match the units. Microsoft's example: for monthly payments on a four-year loan at 12% annual interest, use 12%/12 for rate and 4*12 for nper. For annual payments, use 12% and 4.
- Get the signs right. Microsoft says cash you pay out, such as deposits to savings, is negative, and cash you receive is positive. That's why the deposits above are minus figures and the answers are positive.
- Keep the percent sign. CFI warns that the rate must be entered as a percentage or as a decimal such as 0.04. Forget the percent sign in the cell and the calculation will be wrong.
CFI adds that FV returns #VALUE! when any argument isn't a number, so check for stray text in your input cells.
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Three ways to work it out
| Method | Formula pattern | Use it when |
|---|---|---|
| Lump sum, plain formula | =principal*(1+rate)^years (the ^ operator) | One deposit, compounding yearly |
| FV with monthly deposits | =FV(rate/12, years*12, -deposit, -starting amount) | Regular deposits plus a starting balance |
| RRI | =RRI(nper, pv, fv) | You know the start and end values and need the rate |
RRI answers the reverse question. Microsoft says it returns the equivalent interest rate for the growth of an investment: what rate takes pv to fv over nper periods. Run =RRI(40, 10000, 70000) on Sam's figures and you should get a rate close to 5%, which is a quick way to check an example you've read somewhere. If you're comparing growth rates across years, CAGR in Excel uses the same idea. And PV does the opposite of FV: Microsoft says it gives the present value of a loan or investment, based on a constant rate and either regular payments or a future goal.
Step by step
- Decide the compounding period: monthly, quarterly or yearly.
- Divide the annual rate and multiply the years to match it.
- Enter the deposits you make as negative numbers.
- For a lump sum, use =principal*(1+rate)^periods.
- For regular deposits, use FV and add the starting balance as pv.
- Check the answer with a rough calculation, or with RRI.
CFI also reminds you that compound interest isn't completely risk-free: whoever pays the interest can default, and rates can change. Its Sam example assumes he never adds another penny, and CFI says an extra $10,000 early on would have made the final value dramatically higher.
My verdict
Time does most of the work, which is why the earliest deposits matter most. But check your units before you trust any number Excel gives you. A monthly rate with a yearly count, or a missing percent sign, will give you an answer that looks plausible and isn't. If the percentages themselves trip you up, start with how to calculate a percentage in Excel, then come back to FV.
Frequently asked questions
What is the formula for compound interest in Excel?
For a lump sum, =principal*(1+rate)^years, using the ^ operator. For regular deposits, use the FV function with the rate and periods matched to the compounding.
How do I calculate monthly compound interest in Excel?
Divide the annual rate by 12 and multiply the years by 12, in both the plain formula and FV.
Why does FV give a negative answer?
Because the signs are reversed. Microsoft says cash you pay out is negative and cash you receive is positive, so enter deposits as negatives to get a positive future value.
What does the FV function do in Excel?
Microsoft says it returns the future value of an investment based on periodic, constant payments and a constant interest rate.
How do I find the interest rate from a start and end value?
Use RRI(nper, pv, fv). Microsoft says it returns the equivalent interest rate for the growth of an investment.
