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Using the Excel FV Function to Compute Future Value of Investments

It is easy to compute the future value of a regular program of savings and investing. With the Excel spreadsheet FV function you enter a rate of return, dollar amount of periodic or one-time investments and number of periodic investments. Given these parameters, the FV function computes the future value of the specified investment stream.

Here are four examples that show you how to use the FV function.

Example 1: Invest $5,000 for 30 Years

Assume that you invest a lump sum of $5,000 at six percent annual interest for 30 years. What will the investment grow to?

In a cell of an Excel spreadsheet enter:

=FV(.06,30,0,-5000,1)

In that cell Excel returns:

$28,717.46

The parameters of the FV function are:

FV Parameters
Parameter Value Comment
Interest rate
.06
Annual interest rate. Adjust annual interest rate if investments are monthly or some other interval.
Number years
30
Number of years to hold the investment.
Periodic investment
0
Enter 0 if no periodic investment or enter the periodic investment dollar amount as a negative number.
Lump-sum investment
-5000
Enter 0 if no lump-sum investment or enter the lump-sum amount as a negative number.
When invested
1
A 1 indicates the investment is made at the beginning of the year. A 0 indicates the investment is made at the end of the year. Investments made at the beginning of the period yield more money.



Example 2: Invest $1,200 Each Year for 30 years

Assume that you invest $1,200 at the beginning of each year for 30 years and you expect a six percent annual rate of return each year.

In a cell of an Excel spreadsheet enter:

=FV(.06,30,-1200,0,1)

In that cell Excel returns:

$100,562.01

In this example the periodic investment of $1,200 is entered as -1200. The 0 indicates there is no lump-sum investment. The 1 indicates that each periodic investment is made at the beginning of the year.


Example 3: Invest $5,000 for 30 Years and Invest $1,200 Each Year for 30 years

This example combines the investments in the first two examples into one FV function.

In a cell of an Excel spreadsheet enter:

=FV(.06,30,-1200,-5000,1)

In that cell Excel returns:

$129,279.47

This total dollar amount is equal to the sum of $28,717.46 and $100,562.01, the results from the first two examples.


Example 4: Invest $100 Each Month for 30 years

In this example you divide the annual rate of return by 12 to compute the monthly return, enter 360 for the number of investments and -100 for the monthly investment.

In a cell of an Excel spreadsheet enter:

=FV(.06/12,360,-100,0,1)

In that cell Excel returns:

$100,953.76

Note that investing $100 monthly gives you a few more dollars after 30 years compared to investing $1,200 once a year. For higher interest rates and longer investing periods, monthly investing results in significantly more sums of money than annual investing.


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