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In this course, author Curt Frye shows how to perform a wide range of financial calculations quickly and easily using the many financial functions found in Excel 2010. The course details dozens of functions for evaluating cash flows; calculating depreciation; determining rates of return, bond coupon dates, and security durations; and more.
Sometimes investments don't have a single interest rate applied to them. For example, you could put money into a fund that guarantees a return of 4% for the first year, 5% for the second year, and 6% for the third year. In this case, you can use of the FVSchedule function to determine the future value of your investment. FV schedule has two arguments, which are the present value which is the principal of the investment, and the schedule of interest rates. Those arguments are set out in this workbook. You can see that I have the principal, the starting value, in cell C4 and then the rates in cells C5 through C7.
When you put in the interest rates they almost be applied for the same timeframe. So for example, in this case I have an annual interest rate. If you're evaluating over months then you would need to divide those rates by 12, so that they represented a monthly rate. Now I can create my formula in cell C10. So it's =fvschedule and as soon as fvs appears in the cell I get the formula autocomplete for FVSCHEDULE, so I can press the Tab key to fill it in. I also get a left parentheses and I can type the formula C4, then type a comma, and now I can enter the rates.
And I enter the rates by selecting cells C5 through C7. So with that formula in place I can type a right parentheses to close it out. Everything looks good and I'll press the Tab key so I don't scroll down and I see that the future value of my investment after three years is $11,575.20. Now let's say that you want to have a rate that would extend over two years. So for example, you would have 4% in year 1, 5% in year 2, 6% in year 3, and then 6% again. To do that you can just add another entry and I'll call it 6%. Press Enter and then I'll go down to cell C10, double- click the cell so I can edit the formula, and I will change C7 by backspacing over the 7 and typing in 8.
So now my schedule of rates goes from cells C5 through C8. And if I press the Tab key I see that the future value is $12,269.71. The FVSchedule function provides a shortcut for calculating the interest earned by series of rates. You could create a series of formulas to see how your investment progresses each step of the way, but if all you care about is the answer then FVSchedule is the way to go.
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