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Warning: strtotime() [function.strtotime]: It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected 'America/New_York' for 'EST/-5.0/no DST' instead in /home/frodr/public_html/msofficetuneup.com/wp-includes/functions.php on line 35

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Warning: date() [function.date]: It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected 'America/New_York' for 'EST/-5.0/no DST' instead in /home/frodr/public_html/msofficetuneup.com/wp-includes/functions.php on line 109

Warning: date() [function.date]: It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected 'America/New_York' for 'EST/-5.0/no DST' instead in /home/frodr/public_html/msofficetuneup.com/wp-includes/functions.php on line 111

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Calculating the Future Value of an Investment in Excel 2007

Microsoft Excel, Tips & Tricks Add comments

Just as the payment is usually the most important value for a loan calculation, the future value is usually the most important value for an investment calculation. After all, the purpose of an investment is to place a sum of money (the present value) in an instrument for a time, after which you end up with a new (and, hopefully, greater) amount: the future value.

To calculate the future value of an investment, use the FV() function: FV(rate, nper[, pmt][, pv][, type])

rate	The fixed rate of interest over the term of the investment.
nper	The number of periods in the term of the investment.
pmt	The amount deposited in the investment each period (the default is 0).
pv	The initial deposit (the default is 0).
type	The type of deposit. Use 0 (the default) for end-of-period deposits; use
	1 for beginning-of-period deposits.

NOTE

Because both the amount deposited per period (the pmt argument) and the initial deposit (the pv argument) are sums that you pay out, you must enter these as negative values in the FV() function.

In the simplest future value scenario, you invest a lump sum and let it grow according to the specified interest rate and term, without adding any deposits along the way. In this case, you use the FV() function with the pmt argument set to 0:

FV(rate, nper, 0, pv, type)

For example, Figure 1 shows the future value of $10,000 invested at 5 percent over 10 years.

Figure 1 When calculating the future value of an initial lump sum deposit, set the FV()function’s pmtargument to 0.

Another common investment scenario is to make a series of deposits over the term of the investment, without depositing an initial sum. In this case, you use the FV() function with the pv argument set to 0:

FV(rate, nper, pmt, 0, type)

For example, Figure 2 shows the future value of $100 invested each month at 5 percent over 10 years. Notice that the interest rate and term are both converted to monthly amounts because the deposit occurs monthly.

Figure 2 When calculating the future value of a series of deposits, set the FV() function’s pvargument to 0.

For best investment results, you should invest an initial amount and then add to it with regular deposits. In this scenario, you need to specify all the FV() function arguments (except type). For example, Figure 3 shows the future value of an investment with a $10,000 initial deposit and $100 in monthly deposits at 5 percent over 10 years.