FV function is used for the calculation of the Future Value of a loan or any other financial instrument.
The bank agreed to give you a loan and here are the details:
- The amount of the loan is 379,079 USD.
- It is for 5 years, bearing a yearly interest rate of 10%.
- A payment of 100,000 USD has to be made every year.
What is the FV (Future Value) of the loan after 2 payments? (In other words – How much loan is left after 2 payments were made?)
In this example, we kept [type] empty as well, meaning that payments are made at the end of each period. Also, we typed minus before the formula to get a positive FV result.
The FV arguments are as follows:
Rate – That’s our interest rate.
Nper – That’s the number of periods of our loan.
pmt – That’s the fixed payment we have to pay each period for our loan
[PV] (optional argument) – The Present Value of the loan. If this argument is omitted the PV is 0.
[type] (optional argument) – when the payment is made – At the beginning (1) or the end (0) of the period. The default, if omitted, is 0 – End of the period.
Practice FV function
Let’s see if you know how to use the FV function!