From the course: Excel: Analyzing and Visualizing Cash Flows

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Calculate the future value of an investment

Calculate the future value of an investment

From the course: Excel: Analyzing and Visualizing Cash Flows

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Calculate the future value of an investment

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- [Instructor] One of the more conservative investment strategies is to purchase an instrument such as a certificate of deposit or a fixed-rate annuity that enables you to trade lower risk for a relatively low, but known, rate of return. You can evaluate this type of investment using the future value, or FV, function. I'll demonstrate how to do that in this movie. My sample file is the future value workbook, and you can find it in the chapter one folder of the exercise files collection. The FV function can take up to five arguments. The first is the rate, and that is the annual interest rate. You will often divide that by the number of times the interest is compounded during the year. In this case, we'll assume that interest is compounded monthly. Next, we have the number of periods. If we're assuming a monthly compounding, then 120 periods is 120 divided by 12, or 10 years. Next is the payment, that would be the amount of money that you pay into the investment on a regular basis. So…

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