Excel FV Formula (Table of Contents)
FV Formula in Excel
FV Formula or Future Value formula is used for calculating the future value of any loan amount or investment. FV Formula returns the future value of any loan or investment considering the fixed payment need to be done of each period, a rate of interest and investment or loan tenure.
FV Formula in excel can be used from Insert Function which is beside the formula bar by clicking on the icon.
FV Formula in Excel has the following arguments:
- Rate: It is the rate of interest per compounding period. We can directly use the whole rate of interest or we can divide this with total compounding period let’s say a month and use the interest applied for a single month.
- Nper: It can be monthly, quarterly or yearly depending on how the customer is opting the payment term. Nper is the total number of payment or the installments of the whole tenure.
- Pmt: It is a fixed amount which we need to pay in a period.
Above shown arguments are mandatory required in FV Excel Formula. Below are some optional argument as well;
- Pv: It is the present value of asset or investment. Suppose we bought a vehicle 2 years back. So at the present time whatever will be its market value will be kept here. If we do not keep this value then in excel automatically it will be considered as 0.
- Type: Use 1 if the EMI is paid at the start of the month, 0 if the EMI is paid at the end of the month. For this also if we do not keep then in excel automatically it will be considered as 0.
How to Use FV Formula in Excel?
FV formula in excel is very simple and easy to use. Let’s understand how to use FV Formula in excel with some examples.
Excel FV Formula – Example #1
We have data where a person wants to do some investment. Investment Company is offering the return interest rate of 10% yearly. And that person opts 5 years with a fixed monthly payment of nearly about Rs. 1000/- plan.
If we summarize the above data, then we will have;
As we have discussed in the argument above so we can keep a rate of interest as it is or we can divide it within the formula or else we can first scrub the argument separately and then use it in the formula. For better understanding, first, let us scrub the data separately. For that, we need a rate of interest applicable for per month which will be our Rate and a total number of payment which will be made in the whole tenure of loan which will be our Nper.
Now as per Input data which we have seen above, our Rate is calculated by using the formula =B2/B4
The Result will be as given below.
Nper is calculated by using formula =B3*B4
The Result will be as shown below.
Now we can directly use these parameters in our excel FV Formula. First, go to the cell where we need the output. Then go to insert function option located beside the formula bar as shown below.
Once we do that we will get the Insert function box. Now from there under the Financial category from Or select a category option search FV function from the list. Or else, we can keep the Or select a category as ALL and look for required function as shown below. And click on Ok.
Now for the selected cell for output E2, we will get an argument box for FV Function. Now from there select the Rate, Nper, and Pmt as calculated above.
As we know, for the function argument of FV Formula, we have selected all the necessary cells. At the bottom left of the argument box, we will get the result of the applied function. Here we are getting the result in negative. Which means the invested amount granted from the bank.
If we need to use this data in another form, then we can apply a negative sign ‘ – ‘ in Pmt argument box to get a positive result. And once we apply negative sign, we will see the formula result in positive in the bottom left of the argument box. Once done, click on Ok.
Once we will click on Ok, we will get the result in the selected cell as shown below.
The calculated future value of invested amount which is in INR (Indian Rupees) as Rs. 77,437.07/- is the final amount can be gained by that person for 5-year tenure with the interest rate of 10% if that person pays Rs. 1000/- monthly EMI as an investment for 5 years.
Excel FV Formula – Example #2
Below is another example for which we need to calculate Future Value or compounded amount of a Loan.
For this, go to the edit mode of the cell where we need to see the output by typing “=” sign (Equal). And search and select FV Formula in excel as shown below.
Here we will directly use the data and crunch it in the formula itself as shown below. We have divided the Rate with a total number of months of the loan period. And Nper will be the multiplication of 12 and 30 as a compounded period. And we have considered the compounding period amount as Rs 23000/- which is our PV.
Now press the Enter key to get the result as shown below.
As the obtained value FV is Rs. 40,813,922.14/- which means the future value of loan amount after 30 years of compounding will be Rs. 40,813,922.14/-
Pros
- It is quite useful in most of the financial calculation.
- Because of ease of use, anyone can calculate their return on investment.
Things to Remember About FV Formula in Excel
- A negative sign used in example-1 shows the amount invested by the customer through an investment firm.
- Keeping “0” for Type means that payment of EMI is done at the end of the month.
- PV is optional but in some cases, where the compound interest rate is applicable, then it is recommended to consider PV (Present value).
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