EXCEL FV FUNCTION
Excel FV Function Introduction
This function estimates an investment’s future worth based on periodic constant payments and a constant interest
rate.
Description of Excel FV Function
Syntax:
=FV (rate, nper, pmt, [pv], [type])
Parameter list:
- The interest rate per period is referred to as the rate.
- The total number of payment periods is denoted by nper.
- pmt – the amount of money paid each period. As the money is being sent out, it must be recorded as a negative figure.
- pv – the present value of future payments (optional). If not specified, the value is presumed to be zero.
- A negative number must be entered.
- When payments are due, type – [optional]. 0 indicates the end of the period and 1 indicates the start of the period.
- The default value is 0.
Step By Step Guide of FV Function
We’re estimating the Future Value of an Investment in this example. First, we calculate the future value based on the current value invested, as well as the payment made at the start of the year.
We calculate the future value without any initial investment and the payment required at the end of the term in the second one.
Finally, we calculate the future value without making any initial investment, and the payment is required at the start of the period.
Key Points
- Rate and nper units must be constant. If you’re making monthly payments on a five-year loan with a 10% annual interest rate, for example, use 10% /12 (annual rate/12 = monthly interest rate) for rate and 5*12 (total payments of 60) for nper. If you’re making annual payments on the same loan, use a rate of 10% (annual interest) and a nper of 5 (5 total payments).
- Payment value must be negative if pmt is for cash out (i.e. deposits to savings, etc.) and positive if pmt is for cash in (i.e. income, dividends).
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