Excel Training London: fv

The FV function in Excel is used to calculate the future value of an investment based on a constant interest rate. It can be used for both lump-sum investments and periodic investments (like monthly contributions). Below is an expanded explanation of the FV function, including examples with data and formulas.

Syntax of the FV Function

FV(rate, nper, pmt, [pv], [type])

rate: The interest rate per period.
****nper`**: The total number of payment periods.
pmt: The payment made each period (optional if pv is provided).
pv: The present value or lump-sum amount (optional if pmt is provided).
type: When payments are due (0 = end of period, 1 = beginning of period; optional, default is 0).

Examples of FV Function

Example 1: Future Value of a Lump-Sum Investment

You invest $10,000 at an annual interest rate of 5% for 10 years. The interest is compounded annually.

Data:
- Present Value (pv): -$10,000 (negative because it's an outflow)
- Annual Interest Rate (rate): 5% or 0.05
- Number of Years (nper): 10
- Payment (pmt): 0 (no periodic payments)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(0.05, 10, 0, -10000, 0)
```
Result: $16,288.95

Example 2: Future Value of Periodic Investments

You contribute $500 monthly to an investment account with an annual interest rate of 6% for 20 years. The interest is compounded monthly.

Data:
- Monthly Interest Rate (rate): 6% / 12 = 0.5% or 0.005
- Number of Months (nper): 20 * 12 = 240
- Monthly Payment (pmt): -$500 (negative because it's an outflow)
- Present Value (pv): 0 (no initial lump-sum investment)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(0.005, 240, -500, 0, 0)
```
Result: $232,175.75

Example 3: Future Value with Both Lump-Sum and Periodic Investments

You invest $5, 000 i n i t i a l l y a n d c o n t r i b u t e$ 200 monthly for 15 years at an annual interest rate of 4%. The interest is compounded monthly.

Data:
- Monthly Interest Rate (rate): 4% / 12 = 0.333% or 0.00333
- Number of Months (nper): 15 * 12 = 180
- Monthly Payment (pmt): -$200 (negative because it's an outflow)
- Present Value (pv): -$5,000 (negative because it's an outflow)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(0.00333, 180, -200, -5000, 0)
```
Result: $58,898.46

Example 4: Future Value with Payments at the Beginning of the Period

You contribute $1,000 annually at the beginning of each year for 25 years at an annual interest rate of 7%.

Data:
- Annual Interest Rate (rate): 7% or 0.07
- Number of Years (nper): 25
- Annual Payment (pmt): -$1,000 (negative because it's an outflow)
- Present Value (pv): 0 (no initial lump-sum investment)
- Type (type): 1 (payments at the beginning of the period)
Formula:
excel
Copy
```
=FV(0.07, 25, -1000, 0, 1)
```
Result: $63,249.04

Example 5: Future Value with a Negative Interest Rate

You invest $8,000 at an annual interest rate of -2% (declining value) for 5 years.

Data:
- Annual Interest Rate (rate): -2% or -0.02
- Number of Years (nper): 5
- Payment (pmt): 0 (no periodic payments)
- Present Value (pv): -$8,000 (negative because it's an outflow)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(-0.02, 5, 0, -8000, 0)
```
Result: $7,234.30 (the value decreases due to the negative interest rate)

Example 6: Future Value with a Large Number of Periods

You invest $1,000 at a monthly interest rate of 0.5% for 30 years (360 months).

Data:
- Monthly Interest Rate (rate): 0.5% or 0.005
- Number of Months (nper): 30 * 12 = 360
- Payment (pmt): 0 (no periodic payments)
- Present Value (pv): -$1,000 (negative because it's an outflow)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(0.005, 360, 0, -1000, 0)
```
Result: $6,022.58

Example 7: Future Value with a Zero Interest Rate

You invest $2,000 with no interest (0%) for 10 years.

Data:
- Annual Interest Rate (rate): 0% or 0
- Number of Years (nper): 10
- Payment (pmt): 0 (no periodic payments)
- Present Value (pv): -$2,000 (negative because it's an outflow)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(0, 10, 0, -2000, 0)
```
Result: $2,000 (no growth due to 0% interest)

Example 8: Future Value with a High Interest Rate

You invest $500 at an annual interest rate of 15% for 20 years.

Data:
- Annual Interest Rate (rate): 15% or 0.15
- Number of Years (nper): 20
- Payment (pmt): 0 (no periodic payments)
- Present Value (pv): -$500 (negative because it's an outflow)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(0.15, 20, 0, -500, 0)
```
Result: $8,183.89

Example 9: Future Value with a Small Periodic Investment

You contribute $10 monthly for 5 years at an annual interest rate of 3%. The interest is compounded monthly.

Data:
- Monthly Interest Rate (rate): 3% / 12 = 0.25% or 0.0025
- Number of Months (nper): 5 * 12 = 60
- Monthly Payment (pmt): -$10 (negative because it's an outflow)
- Present Value (pv): 0 (no initial lump-sum investment)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(0.0025, 60, -10, 0, 0)
```
Result: $646.50

Example 10: Future Value with a Large Initial Investment

You invest $50, 000 i n i t i a l l y a n d c o n t r i b u t e$ 1,000 annually for 30 years at an annual interest rate of 8%.

Data:
- Annual Interest Rate (rate): 8% or 0.08
- Number of Years (nper): 30
- Annual Payment (pmt): -$1,000 (negative because it's an outflow)
- Present Value (pv): -$50,000 (negative because it's an outflow)
- Type (type): 0 (payments at the end of the period)
Formula:
excel
Copy
```
=FV(0.08, 30, -1000, -50000, 0)
```
Result: $734,075.16

These examples demonstrate how the FV function can be used in various scenarios to calculate the future value of investments. Adjust the inputs to match your specific situation!

Excel Training London

Friday, 31 January 2025

fv