How to Use the FV Function in Excel
The FV (Future Value) function in Excel and Google Sheets is designed to calculate the future value of an investment given a constant interest rate and periodic payments. This function is essential in financial planning, enabling users to forecast the accumulated value of investments or savings over time.
Basics of the FV Function
The syntax for the FV function is as follows:
=FV(rate, nper, pmt, [pv], [type])rate: The interest rate per period.nper: The total number of payment periods.pmt: The payment amount per period; this value needs to remain constant throughout the investment term.pv(optional): The present value, or initial amount, of the investment.type(optional): Indicates the timing of the payment, with 0 for end of the period and 1 for beginning.
Example 1: Calculate the Future Value of an Investment
Consider an initial investment of $10,000, with an annual interest rate of 5%, and additional annual investments of $2,000 for the next five years. We’ll calculate the future value of this investment scenario.
| Inputs | Values |
|---|---|
| Rate | 5% or 0.05 |
| Nper | 5 years |
| Pmt | -$2,000 (as it represents an outflow) |
| PV | -$10,000 (initial investment also considered as an outflow) |
To calculate using Excel: =FV(0.05, 5, -2000, -10000)
Example 2: Calculate the Future Value of a Savings Account
Imagine you are setting aside $500 each month into a savings account that yields a 3% annual interest, compounded monthly. You aim to find out the future value of your savings after 10 years.
| Inputs | Values |
|---|---|
| Rate | 3%/12 or 0.0025 (to calculate monthly interest) |
| Nper | 10 years * 12 months = 120 months |
| Pmt | -$500 (representing monthly savings) |
| PV | 0 (starting without any initial savings) |
To compute in Google Sheets: =FV(0.0025, 120, -500, 0)
In conclusion, the FV function offers a robust solution for projecting the growth of investments or savings in Excel and Google Sheets. By using specific inputs, users can effectively plan and manage their financial goals.
More information: https://support.microsoft.com/en-us/office/fv-function-2eef9f44-a084-4c61-bdd8-4fe4bb1b71b3
Other functions
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Returns the accrued interest for a security that pays interest at maturity
Returns the depreciation for each accounting period by using a depreciation coefficient
Returns the depreciation for each accounting period
Returns the number of days from the beginning of the coupon period to the settlement date
Returns the number of days in the coupon period that contains the settlement date
Returns the number of days from the settlement date to the next coupon date
Returns the next coupon date after the settlement date
Returns the number of coupons payable between the settlement date and maturity date
Returns the previous coupon date before the settlement date
Returns the cumulative interest paid between two periods
Returns the cumulative principal paid on a loan between two periods
Returns the depreciation of an asset for a specified period by using the fixed-declining balance method
Returns the depreciation of an asset for a specified period by using the double-declining balance method or some other method that you specify
Returns the discount rate for a security
Converts a dollar price, expressed as a fraction, into a dollar price, expressed as a decimal number
Converts a dollar price, expressed as a decimal number, into a dollar price, expressed as a fraction
Returns the annual duration of a security with periodic interest payments
Returns the effective annual interest rate
Returns the future value of an initial principal after applying a series of compound interest rates
Returns the interest rate for a fully invested security
Returns the interest payment for an investment for a given period
Returns the internal rate of return for a series of cash flows
Calculates the interest paid during a specific period of an investment
Returns the Macauley modified duration for a security with an assumed par value of $100
Returns the internal rate of return where positive and negative cash flows are financed at different rates
Returns the annual nominal interest rate
Returns the number of periods for an investment
Returns the net present value of an investment based on a series of periodic cash flows and a discount rate
Returns the price per $100 face value of a security with an odd first period
Returns the yield of a security with an odd first period
Returns the price per $100 face value of a security with an odd last period
Returns the yield of a security with an odd last period
Returns the number of periods required by an investment to reach a specified value
Returns the periodic payment for an annuity
Returns the payment on the principal for an investment for a given period
Returns the price per $100 face value of a security that pays periodic interest
Returns the price per $100 face value of a discounted security
Returns the price per $100 face value of a security that pays interest at maturity
Returns the present value of an investment
Returns the interest rate per period of an annuity
Returns the amount received at maturity for a fully invested security
Returns an equivalent interest rate for the growth of an investment
Returns the straight-line depreciation of an asset for one period
Returns the sum-of-years' digits depreciation of an asset for a specified period
Returns the bond-equivalent yield for a Treasury bill
Returns the price per $100 face value for a Treasury bill
Returns the yield for a Treasury bill
Returns the depreciation of an asset for a specified or partial period by using a declining balance method
Returns the internal rate of return for a schedule of cash flows that is not necessarily periodic
Returns the net present value for a schedule of cash flows that is not necessarily periodic
Returns the yield on a security that pays periodic interest
Returns the annual yield for a discounted security; for example, a Treasury bill
Returns the annual yield of a security that pays interest at maturity