# Compare effect of compounding periods

=FV(rate,nper,pmt,pv)

To compare the effect of (non-annual) compounding periods on growth, you can set up a worksheet as shown, and calculate future value with the FV function. In the example shown, $1000 is invested with an annual interest rate of 5%, the formulas in column D calculate the future value of the $1000 assuming the compounding periods shown in column C. The formula in D5, copied down, is:

=FV(rate/C5,C5*term,0,-pv)

where **pv** (G4), **rate** (G5), and **term** (G6) are named ranges.` `

### How this formula works

The FV function calculates compound interest and return the future value of an investment over a specified term. To configure the function, we need to provide a rate, the number of periods, the periodic payment, the present value:

- Present value (
**pv**) is the named range G4 - Rate is provided as as annual rate/periods, or
**rate**/C5 - Number of periods (nper) is given as periods * term, or C5*
**term** - There is no periodic payment, so we use zero (0)

By convention, the present value (pv) is input as a negative value, since the $1000 "leaves your wallet" and goes to the bank during the term.

The named ranges automatically behave like absolute references, so there is no need to use dollar signs ($).

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