FV formula is also known as Future Value formula in excel which is used to calculate the future of the upcoming value of an investment and is dependent on the constant interest, periods and payments, it is an inbuilt function in excel which is also a financial formula and can be accessed from the financials section of the formula tab.
FV Formula Excel (Table of Contents)
Excel FV Formula
Future Values is nothing but what will be the current investment amount after a certain period of time at a specified rate of interest. For example, Mr. A is investing Rs. 50000 in share market for 2 Years. He is expecting a 15% return on investment.
Let’s take a look at the formula of FV function in excel. The syntax includes 3 mandatory and two optional parameters.
- Rate: This is nothing but the interest rate for your investment.
- Nper: No., of the period for investment.
- PMT: This could be optional if you are making a one-time investment. If you are making regular payments at intervals then here you need to mention the amount.
- [pv]: What is the present value i.e. your investment. It should be a negative value.
- [type]: This is to mention whether the payment is at the beginning or at the end of the period. If it is at the beginning 1 is the argument, if it is at the end of the period then 0 is the argument.
Formula is = 50000 * (1+0.15 * 2)
Future value of 50000 investment of Mr. A is worth 66,125 at 15% interest rate.
What is FV in Excel?
Excel FV Formula works similar to the above example. It will return the future value in excel of an investment for a constant period of time at a constant rate of interest.
If you supply what is the investment amount, what is the interest rate, what is the time frame FV will calculate the future value of your investment?
How to Use FV Formula in Excel?
Below are some of the examples of FV Formula in Excel.
Have you ever thought about your investment? Assume you are making an investment of USD 5000 today for the next 3 Years. You are expecting a return of 14% per anum. Now you need to know what would be the future value (FV) of your investment.
Step 1: Open Excel FV function in B6 cell.
Step 2: Rate is nothing but interest rate so select B4 cell.
Step 3: NPER is no., of years of investment i.e. 3 years. Select the B2 cell.
Step 4: We are not making any payments additionally. So put zero for PMT argument.
Step 5: PV is present value i.e. the present value of our investment. Since this is an outflow payment we need to mention as a negative value.
Step 6: payment will be made at the beginning of the period, so mention 1 as the argument.
So future value of your investment USD 5000 is worth 7408 at 14% interest rate for 3 years.
Assume you are approached by one of the mutual fund agents to make an investment in their fund. He has given you two options for you.
He has given you two options.
- Option 1 is the investment of USD 10 K for 4 years at 14% interest rate.
- Option 2 is the investment of USD 8 K for 4 years at a 20% interest rate.
Now you are in confusion to choose one of these two plans and don’t know how to go about it. Nothing to worry by calculating excel FV formula of these two investments we will select the best plan you the investment.
Step 1: Open Excel FV function in C7 cell.
Step 2: Select the rate as C5 cell.
Step 3: Now select C4 cell as Nper argument.
Step 4: No interval payments, so leave PMT blank.
Step 5: Select PV as C3 cell is negative.
Step 6: Select the type at the beginning of the period.
So, Option 1 will yield 16,890 for your 10 K investment.
Step 7: Since we have already applied the excel FV formula in C7 copy and paste the same formula to F7 cell to have FV for Option 2.
So from this analysis, it is clear that Option 1 is better than Option 2. Because option 2 will return only 16,589 when we compared to Option 1 which yields 16,890 which is slightly higher than the Option 2.
Things to Remember
- PMT & PV should be negative values.
- PMT & PV are cash outflows.
- If the investment is for less than the year and the interest rate is per anum then we need to divide the interest rate by 12 and multiply for investment months.
- Excel FV function accepts only numerical values.
- If the given numerical values are non-numeric then we will get #VALUE!
This has been a guide to FV Formula in Excel. Here we discuss How to use FV Formula in Excel along with practical examples and downloadable excel template. You may learn more about excel from the following articles –