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Future value of annuity

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

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

=FV(C5,C6,-C4,0,0)
Explanation 

The FV function is a financial function that returns the future value of an investment. You can use the FV function to get the future value of an investment assuming periodic, constant payments with a constant interest rate. 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 FV function is configured as follows like this in cell C7:

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

with the following inputs:

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

With this information, the FV function returns $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. To calculate an annuity due with the FV function, set the type argument to 1:

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

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

Author 
Dave Bruns

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