FV stands for Future Value. FV function is the last of the financial keys. Future Value helps us to calculate the future value of the investment for the investment made today. FV function is used when you what to know what return will you obtain if you invest something today at the same interest rate and for a constant period of time.
It will be easy to calculate if you know the monthly or yearly investment you need to make, the constant interest rate at which you’ll invest, and the time period for which investment is made.
The Formula to Calculate Future Value
Where,
FV stands for the future value which we will yield.
The rate stands for the interest rate at which investment is to be made.
Nper stands for the time period investment has to be done.
PV stands for the Present Value of the investment
Type stands for the time at which investment is to be made at the beginning or at the end of the year
The arguments in the formula with Box brackets are optional.
Example of FV Function
We make a Deposit of Rs.2000 every year for 5 years. The rate at which deposit is made is 9%. What will be the future value of the deposits made today?
Solution:
Here Rate: 9%
Nper: 5 years
PMT: Rs.2000 (deposit)
PV: 0
Type: 1 (Here we are assuming that the deposit is made at the beginning of the period.)
You can check whether your future value is correct by going through the lengthy process which is explained in the video.