Working with Future Value

The concept of future value is quite simple and is based on the fact that a given amount of money received today will be worth more at some time in the future. It’s easy to understand why this is true—money you have now can be invested and earn interest, hence its value increases.

Future value calculations are useful in a variety of situations. For example, you plan to invest $10,000 in a certificate of deposit at 4% for three years; how much will you have at the end of the three years? Another example is putting $50 a month in your daughter’s college fund. How much will you have when she goes to college in 12 years, assuming the rate of return is 5%? You use the FV function for future value calculations.

The FV function has the following syntax:

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

The first three arguments are required:

• rate is the projected rate of return per period.

• nper is the number of periods.

• pmt is the payment per period.

Taken From : Manage Your Money and Investments with Microsoft Excel

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