Explanation

The FV function is a financial function that returns the future value of an investment. You can use the FV function to get the future value of an investment assuming periodic, constant payments with a constant interest rate. An annuity is a series of equal cash flows, spaced equally in time.

In this example, a $5000 payment is made each year for 25 years, with an interest rate of 7%. To calculate future value, the FV function is configured as follows like this in cell C7:

=FV(C5,C6,-C4,0,0)

with the following inputs:

  • rate - the value from cell C5, 7%.
  • nper - the value from cell C6, 25.
  • pmt - negative value from cell C4, -100000
  • pv - 0.
  • type - 0, payment at end of period (regular annuity).

With this information, the FV function returns $316,245.19. Note payment is entered as a negative number, so the result is positive.

Annuity due

An annuity due is a repeating payment made at the beginning of each period, instead of at the end of each period. To calculate an annuity due with the FV function, set the type argument to 1:

=FV(C5,C6,-C4,0,1)

With type set to 1, FV returns $338,382.35.

Explanation

The FV function is a financial function that returns the future value of an investment, given periodic, constant payments with a constant interest rate. The PV function returns the present value of an investment. You can use the PV function to get the value in today’s dollars of a series of future payments, assuming periodic, constant payments and a constant interest rate.

This simple example shows how present value and future value are related. In the example shown, Years, Compounding periods, and Interest rate are linked in columns C and F like this:

F5=C9
F6=C6
F7=C7
F8=C8

The formula to calculate future value in C9 is based on the FV function :

=FV(C8/C7,C6*C7,0,-C5,0)

The formula to calculate present value in F9 is based on the PV function :

=PV(F8/F7,F6*F7,0,-F5,0)

No matter how years, compounding periods, or rate are changed, C5 will equal F9 and C9 will equal F5.