FV function
The Excel FV function stands for Future Value and returns the future value of an investment based on a given interest rate and a schedule of constant payments.
The Excel FV function stands for Future Value and returns the future value of an investment based on a given interest rate and a schedule of constant payments. The arguments for this function are:
=FV(Interest Rate, Number of Payments, Payment Amount, Present Value, Type)
The Interest Rate is the interest rate earned on the investment per period. The period is how often the investment payments are made. For example, if the annual interest rate is 6.0% and you invest once a month, the interest rate you would enter is 6.0%/12, or 0.5%. If the payments are only once a year then the interest rate you would enter would just be 6.0%.
The Number of Payments is the total number of investment payments made. For example, weekly payments for 2 years would be 52*2 = 104 payments. Annual payments for 25 years would be 25.
The Payment Amount is the amount of each investment payment. Because Excel uses basic financial accounting principles, an investment would be entered as a negative value. A positive value would correspond to an amount being borrowed.
The Present Value is an optional field, corresponding to the initial payment, if any, that is made. So, if you were investing $500 initially and then $100 per month, the PV would be -500, and the Payment Amount would be -100. If no value is interested for the Present Value, it is assumed to be 0.
The Type is another optional field, indicating whether the payments are made at the beginning or the end of the payment period. Entering 1 for the Type value indicates payments made at the beginning of the period, while a 0 indicates payments made at the end of each period. Payments at the end of the period is the default.
Below are some examples of FV equations and their results. Typically, the values are entered into cells in Excel instead of into the equation itself. This allows them to be easily changed to see how they impact the FV.
Investing $200 a month for 2 years at an interest rate of 7% = FV(7%/12,24,-200) => $5,136.21
Investing $100 now and $25 a week for 4 years at an interest rate of 5% = FV(5%/52,208,-25,-100) => $5,875.55
Investing $1000 at the beginning of each year for 40 years at an interest rate of 6% =FV(6%,40,-1000,0,1) => $164,047.68
