Calculation of Future value in excel

What is the Future Value?

The future value (FV) is the measure of performance for the long term investment or monetary fund based on a constant interest rate.

Using function FV you can measure the performance of associate investment assuming periodic, constant payments with a relentless charge per unit or constant interest rate.

There are two ways of calculating future value:

• Simple annual interest and

• Annual compound interest.

Future value with simple interest is calculated in the following manner:

Future Value = Present Value X [1 + (Interest Rate x Number of Years)]

Future value with compounded interest is calculated in the following manner:

Future Value = Present Value x [(1 + Interest Rate) ^{Number of Years}]

Future value calculation Example and syntax

Syntax : FV (Rate, NPER, PMT , [PV], [type])

Rate - The interest rate per period.
NPER - The total number of payment periods.
PMT- The payment made each period. It must be entered as a negative number.
PV - [optional] The present value of future payments. If omitted, assumed to be zero. It must be entered as a negative number.
type - [optional] When payments are due. 0 = end of period, 1 = beginning of period. The default is 0.