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Chapter 4

Analyzing Financial Data

Calculate Future Value

If you have \$1,000 and you plan to invest it at 5 percent interest, compounded annually for ten years, the amount you will receive at the end of ten years is called the future value of \$1,000. You can use the Excel FV function to calculate the amount you will receive.

FV takes five arguments: rate, the interest rate; nper, the term of the investment; pmt, the amount of each deposit into the investment; the optional pv, your initial investment; and the optional type, a number indicating when deposits are due (0 or blank for end-of-period; 1 for beginning-of-period). When you are working with FV, cash outflows are considered negative amounts, so you need to enter the pmt and pv arguments ...

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