Future value formula

[krisso]

Hi

I have a standard calculation that I work out for interest that I am happy works correctly

=SUM(G5*F5*D5/365)

Yet when i use the FV function I am getting a different total for this one calculation based on £1000 @ 8%

=FV(F5/365,D5,0,-G5)-G5

I should be getting 22p at 8% which is what my current formula works out at by the FV formula is calculating to 26p a day

Thanks

 

[jasonb75]

I get the same results form both formulas. Perhaps you have the values in the wrong order for the FV funciton to work correctly.

D5 = 1
F5 = 8%
G5 = 1000

 

[krisso]

You are correct for 1 day you get the same result but after 20 days the interest amount starts drifting so in my normal formula I get £4.38 but under the FV formula I get £4.39 and I find the more the days increase the further the drift is

 

[joeu2004]

This is due to the difference between "simple" interest and "compound" interest.

Your SUM formula is calculating "simple" interest based on the initial balance (G5). In other words, you earn G5*F5/365 in interest each of D5 days.

The FV formula is calculating "compound" interest. On the first day, you earn G5*F5/365 in interest. But that is added to the balance. So on the second day, you earn (G5 + G5*F5/365)*F5/365 in interest. And so on.

 

[AhoyNC]

Your formula is calculating simple interest, but the FV function as you are using it is calculating compound interest.

To use FV for simple interest. Rate = 0 NPER = 26 (days in this case) PMT = .219178 (which is interest per day times 1000) PV = 1000
FV=-(0,26,.219178,1000) for simple interest.

See that Joeu2004 already had answered.