In this blog, we'll explore how to use a spreadsheet to calculate future values without dealing with any complicating formulas. Just follow the instructions step by step and you will never go wrong.
Future Value of a Single Payment
1) In A1, type "Interest Rate Per Year"
2) In A2, type "No of years"
3) In A3, type "Value In the present day"
4) In A5, type " Future Value = "
5) In B5, type "= FV(B1,B2,0,B3)"
Suppose if you would like to put $10,000 into a one year fixed deposit that pays an interest of 5%. To find the future value of this deposit i.e, the value of the deposit on the day the fixed deposit matures, do the following:
1) Type 5% in B1
2) Put 1 in B2
3) In B3, type -$10,000
The future value will be reflected as $10,500. The final result will look like this:
Try changing the values in B1, B2 and B3 to watch how the future value changes.
Future Value of a series of payments
To find the future value of a series of payments, do the following:
1) In A1, type "Interest Rate Per Year"
2) In C1, type "If you're workign with months, divide this figure by 12)
3) In A2, type "No of years"
4) In C2, type "If you're working with months, multiply this figure by 12)
5) In A3, type "Amt Per Payment"
6) In A4, type "Arrears/Due"
7) In C4, type "(Key in 0 if the payment is made in the beginning of the period and 1 for the end of the period)"
8) In A6, type "Future Value = "
9) In B6, type "=FV(B1,B2,B3,0,B4)"
Suppose if you have to deposit $1000 at the end of every year for 5 years at an interest of 4%. To find the future value of this investment, do the following:
1) In B1, type 4%
2) In B2, type 5
3) In B3, type -1000
4) In B4, type 1
The future value of this investment will be worth $5,632 and the result will look something like this.
Try changing the values in B1, B2, B3 and B4 to see how the future value changes.
I hope that you found this blog useful.
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