I. Intro
The FV function returns the future value of a loan (or investment).
II. About the function
- Formula: =FV(rate,nper,pmt,[pv],[type])
- Arguments:
- rate (required): The interest rate of the loan. If you borrow a loan at an annual interest rate of 12% to buy a house and repay the loan monthly, the monthly interest rate is 12%/12 = 1%.
- nper (required): The total number of payment periods for this loan.
- pmt (required): The amount to be paid per period. This amount remains unchanged throughout the loan period. Pmt usually includes principal and interest, but not taxes and other fees.
- [pv](optional): The present value, or the sum of the current value of a series of future payments; also known as the principal.
- [type] (optional): The numbers 0 and 1 represent whether payments are due at the beginning or at the end of a period respectively.
- Example: =FV(2%,12,100,400,0)
- Note:
- The interest rate (the first argument) can't be 0.
- Please ensure that the units for the interest rate and nper are consistent. For a four-year loan on an interest rate of 12% that is paid monthly, the rate should be 12%/12, and nper should be 4*12. For the same loan that is paid annually, then the rate should be 12%, and nper should be 4.
- Cash outflow is represented by negative numbers and cash inflow is represented by positive numbers.
III. Steps
Use the FV function
- Select a cell and enter =FV.
- Enter the arguments in the cell. For example: =FV(2%,12,100,400,0).
- Press Enter to get the result, which is -1848.505691 in this example.
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Delete the FV function
Select the cell with the FV function and press Delete.
IV. Use cases
Investment: Calculate the future value of an investment
The value of funds varies over time depending on the financial environment, which is why the concepts of present value and future value are so important. With the FV function, you can quickly calculate the future value of an investment with a single formula.
- Formula used below: =FV(B2/12,B3,B4,B5,B6)
- About the arguments:
- Since payment is made on a monthly basis in this example, the annual interest rate needs to be converted to a monthly interest rate, which is 8%/12.
- Click the other cells to set them as arguments. Note that only pv and type are optional, and all others are required.
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