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Future value vs. Present value

Excel formula: Future value vs. Present value
Summary 

This example shows how present value and future value are related using the PV function and the FV function. Even as inputs for years, compounding periods, or rate are changed, C5 will equal F9 and C9 will equal F5.

Explanation 

The FV function is a financial function that returns the future value of an investment, given periodic, constant payments with a constant interest rate. The PV function returns the present value of an investment. You can use the PV function to get the value in today's dollars of a series of future payments, assuming periodic, constant payments and a constant interest rate. 

This simple example shows how present value and future value are related. In the example shown, Years, Compounding periods, and Interest rate are linked in columns C and F like this:

F5=C9
F6=C6
F7=C7
F8=C8

The formula to calculate future value in C9 is based on the FV function:

=FV(C8/C7,C6*C7,0,-C5,0)

The formula to calculate present value in F9 is based on the PV function:

=PV(F8/F7,F6*F7,0,-F5,0)

No matter how years, compounding periods, or rate are changed, C5 will equal F9 and C9 will equal F5.

Author 
Dave Bruns

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