Calculating Future Value

Problem

You need to compute the future value of a series of payments, considering the time value of money.

Solution

Use the FV function.

Discussion

FV performs essentially the reverse of PV, which was discussed in the previous recipe. Consider this example: what is the future value of $500 monthly payments over five years at an annual 8% interest rate? You can use FV to find an answer. The syntax for FV is =FV(rate, nper, pmt, pv, type), where rate is the interest rate per period, nper is the number of payment periods, pmt is the payment per period, pv is the present value, and type is an indicator of the payment type (0 for payments at the end of each pay period or 1 for payments at the beginning of each pay period).

For our example, the cell formula =FV(0.08/12,5*12,-500,0,0) returns a future value of $36,738.43. The interest rate passed in as the first argument in the call to FV is 0.08/12 to compute the monthly rate, since payments are made every month. Further, the number of payments over the five-year period was entered as 5*12. Also, the $500 monthly payment was entered as a negative value, indicating it's an out payment.

See Also

Take a look at the other recipes in this chapter to learn about other calculations of the time value of money.

Using Excel

Getting Acquainted with Visual Basic for Applications

Collecting and Cleaning Up Data

Charting

Statistical Analysis

Time Series Analysis

Mathematical Functions

Curve Fitting and Regression

Solving Equations

Numerical Integration and Differentiation

Solving Ordinary Differential Equations

Solving Partial Differential Equations

Performing Optimization Analyses in Excel

Introduction to Financial Calculations

Index



Excel Scientific and Engineering Cookbook
Excel Scientific and Engineering Cookbook (Cookbooks (OReilly))
ISBN: 0596008791
EAN: 2147483647
Year: N/A
Pages: 206
Authors: David M Bourg

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