The fv( function (short for future value) calculates the future value of an investment.
This function has five parameters:
rate – is the interest rate of the investment (per period). For example, if there is one payment per year, this is the annual percentage rate. If there is one payment per month, then this is the monthly percentage rate.
periods – is the number of payments that will be made during the life of the investment. For example, if this is a 36 month investment with one payment per month, this value is 36. If this is a 30 year investment with one payment per month this value is 360.
payment – is the amount being invested each period. This should actually be the negative of the amount invested. For example, if you invest $500 per month, the payment amount should be –500.
pv – (present value) is the initial value of the investment at the start of the period (actually the negative of the initial value). For example if your savings account starts with $2,000, this value should be –2000.
begin – specifies whether payments are made at the beginning (1) or end of each period (0).
The fv( function (short for future value) calculates the future value of an investment. For example, if you invest $500 a month at 10% annual interest, how much money will you have at the end of ten years? This function will calculate that value for you.
If the payment period is annually the calculation is simple. Suppose you start with $3,000 and invest it in a savings account at 7% annual interest. Then you take $5,000 at the end of each year for the next ten years and invest that also. This formula will calculate the final balance in your account at the end of 10 years.
Most investments are paid more frequently than once a year…usually once a month. To calculate the future value for such an investment you must convert the annual percentage rate into a monthly percentage rate by dividing by 12. Suppose you invest $200 a month at the beginning of each month for 5 years into an investment that returns 13.5% annual interest. The final value of this investment after 10 years can be calculated with this formula.
You can also use this function to calculate the appreciation of a fixed up-front investment, with no payments. Suppose you invest $50,000 for 5 years at 14% annual interest. This formula will calculate the value of this money after 5 years:
Of course the fv( function only works with fixed interest rates.
Note: The fv( function is designed to be compatible with the Microsoft Excel function of the same name.
|10.0||No Change||Carried over from Panorama 6.0|