Difference between revisions of "Documentation/How Tos/Calc: FV function"
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Revision as of 09:18, 24 November 2009
FV
Returns the future value of an initial sum with a subsequent stream of payments.
Syntax:
FV(rate; numperiods; payment; presentvalue; type)
- rate: the (fixed) interest rate per period.
- numperiods: the total number of payment periods in the term.
- payment: the payment made each period. If presentvalue is given, this may omitted (defaults to 0).
- presentvalue: the lump sum payment at the start of the term (optional - defaults to 0). With a loan, this would normally be the sum borrowed; with a bond this would generally be 0.
- type: when payments are made (optional - defaults to 0):
- 0 - at the end of each period.
- 1 - at the start of each period (including a payment at the start of the term).
- The value of money is time-dependent; for example, $100 today would be worth $110 in a year if invested at a 10% interest rate.
- FV returns the future value at the end of the term, of a lump sum payment (presentvalue) at the start of the term and a payment being made each period for numperiods periods, at fixed rate interest, compounded each period.
- See Derivation of Financial Formulas for the underlying formula.
Example:
FV(5%; 3; -1000; 0; 0)
- returns 3,152.50 in currency units. You pay 1,000 at the end of each year for 3 years. Assuming an interest rate of 5% you expect to receive 3,152.50 at the end of the term.
FV(7%; 10; -1400; 10000; 0)
- returns a future value of -328.49 in currency units.
Issues:
- Take care that you understand how this function compounds the interest each period. Many financial calculators allow you to set a separate compounding period - spreadsheets do not. Choose the interest rate appropriately.
