How to calculate interest % per year? (using POWER in EXCEL)

Oct 2014
46
0
Mars
I'm trying to calculate the interest per year in MS Excel using the POWER() function, but don't quite understand how to calculate it.

Sorry the forum is formatting my writing strangely...

Lets say I have

DEPOSIT : ONE DOLLAR , initially invested
RETURN : THREE DOLLARS , the total amount returned
PROFIT : TWO DOLLARS , RETURN - DEPOSIT
DAYS : 365 , the number of days the investment lasted
So, that means the INTEREST (%) per YEAR should be 100% (as the profit is 100% what was deposited).

But how do I plug these variables into the POWER(number, power) function in excel to get the same answer? :unsure:

Thanks in advance for your help!
 
Last edited:

romsek

Math Team
Sep 2015
2,967
1,676
USA
assuming interest accrues annually

$P_V = P_I(1+r)^n$

$Profit = P_V - P_I = P_I((1+r)^n -1)$

$P_V \text{ is current value of the account}$

$P_I \text{ is the original investment}$

$r \text{ is the annual interest rate}$

$n \text{ is the number of years in the investment}$

in excel terms

$Profit = P_I(POWER(1+r,n)-1)$

where you've either named certain cells $P_I,~r~,n$ or you use the cell addresses in the formula above.
 
Oct 2014
46
0
Mars
Sorry, I don't quite understand. R is "the annual interest rate", but I don't know what it is, that's what I'm trying to figure out.

I only know the number of days, initial deposit, and return.
 

romsek

Math Team
Sep 2015
2,967
1,676
USA
Sorry, I don't quite understand. R is "the annual interest rate", but I don't know what it is, that's what I'm trying to figure out.

I only know the number of days, initial deposit, and return.
right...
btw, your mistakenly assumed a rate of 100% in your first post.
The actual rate is 200%.

$P_V$ is what you're calling the return
$P_I$ is what you're calling the deposit
$n$ is the length of the investing in years

$P_V = P_I (1+r)^n$

$r = \left(\dfrac{P_V}{P_I}\right)^{1/n} - 1$

$r = POWER(P_V/P_I,1/n)-1$