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Future value of annuity

Excel formula: Future value of annuity
Generic formula 
=FV(rate,periods,payment)
Explanation 

To get the present value of an annuity, you can use the PV function. In the example shown, the formula in C7 is:

=FV(C5,C6,-C4,0,0)

Explanation

An annuity is a series of equal cash flows, spaced equally in time.  In this example, a $5000 payment is made each year for 25 years, with an interest rate of 7%. To calculate future value, the PV function is configured as follows:

  • rate - the value from cell C5, 7%.
  • nper - the value from cell C6, 25.
  • pmt - the value from cell C4, 100000.
  • pv - 0.
  • type - 0, payment at end of period (regular annuity).

With this information, the future value of the annuity is $316,245.19. Note payment is entered as a negative number, so the result is positive.

Annuity due

An annuity due is a repeating payment made at the beginning of each period, instead of at the end of each period. In Excel's FV function, set the type argument to 1 for an annuity due:

=FV(C5,C6,-C4,0,1)

With type set to 1, FV returns $338,382.35.

Author 
Dave Bruns

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