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What is the PV FV Excel formula in Excel future value?
The financial functions in Excel Here we would be looking at the present value and the future value function.
Before getting started with Excel let’s understand what exactly the present value and future value means.
Try to understand it in this way like present value is the current value of your money, whatever money you would be getting after a certain period,
Or whatever money you are holding right now, the value at the current moment at the current period is the present value.
How this does comes into the picture because of the time value of money, you understand the value of money is not constant, it will change.
Many factors influence the value of your money, it’s, whether you say the inflation rate,
The interest rate or the currency value, everything determines the going period all these things determine the value of money.
What money you are holding right now, the same purchasing power of that money would not remain the same after a certain period.
What is PV and FV in Excel future value?
Right after say three years, the value of your money may increase or decrease and before three years before five years it wasn’t the same.
This is all because of the fluctuations in the value of money which is because of the period. And this is how present value comes into the picture and we try to figure out what is the present value.
If we are going to get a certain amount of money after a certain period what is its value right?
Now, will it be profitable for us, the PV function comes into the picture and we try to calculate how much benefit we will be getting because someone says,
Like you are having 10,000 rupees and after one to two years, I’ll give you 11 to 12,000. Will it be okay with you?
Because you have to figure out what was the present value of that amount of money at today’s period, then only you can perfectly analyze whether it would be beneficial for you or not.
And see what do you mean by future value is also the worth of an asset in the future, after a specified period.
If you are like holding 3000 rupees and you want to deposit that into the bank and the bank said that it would pay you, 8% of the interest rate after five years.
How do you calculate NPV using Excel?
Now, what would be the future value you wanted to calculate how to do that let’s get started with an excellent try to understand how to use these functions. Let me zoom in a little bit
That you can see the picture, try to understand the scenario, we are having a rate of interest that is 10%, and the number of years is five,
And periodic instalment that is annually is 3000 rupees. So just consider like you are paying 3000 rupees for five years.
Every year, and add the interest rate of 10 persons so how much amount of money you would be getting after those five years after your instalment is completed.
We would like to calculate that we would use the function of future value. Just type is equal to FV brackets open.
How do you calculate FV and PV?
Now you have here you can see all the instructions you have to add the interest rate.
Choose the interest rate, comma, the number of periods and P r is denoting the number of years, the number of periods.
Here we are having five years, comma, what is the payment the amount, what payment you are making this is the periodic instalment is considered our payment,
And by, I have shown it is negative because it is a cash outflow for you. You understand cash outflow right cash inflow and cash outflow of cash when comes in as inflow when it goes out as outflow.
If you’re making that payment is this an outflow for you. That way I have taken the figure and negative. Present Value window no so we would take it zero,
And the five, we would consider zero and one, as zero indicates the end of the period payment and one indicates the beginning of the period payments
Consider any scenario if you’re making the payment at the end of the period use the zero and if you’re making at the beginning of the period use funds considering zero, we would see what the result we get.
Here is the value amount. Then mean crease, the font size so that you can declare it was realized that. Yeah.
This is what we get. 18,315.30 If you’re making a periodic instalment payment of 3000 rupees for five years at the rate of interest of 10%.
After those five years, you would be getting 18,315.30 rupees. This is how we calculate a simple formula of FV, which we use, is equal to the FV function.
Now, to get out presenting present value, how to go about Just see like we wanted to know what is the present value of the same amount
We would consider the future the value which right now we extracted was 18,315.30 and we would use the same figure to calculate our present value to know what exactly this value is in the current period
Use the formula is equal to, PV brackets open rate of interest again choose 10% number of periods was five years, payment, you are not making any because you are at,
Because you are calculating the future values, calculating the present value so you are unaware of the present payment being made,
Take into consideration the future value, that was tried no we calculated and consider zero, assuming that the payment is being made at the end of the period, close the brackets,
What is the FV formula in Excel?
The financial functions in Excel Here we would be looking at the present value and the future value function.
Before getting started with Excel let’s understand what exactly the present value and future value means.
Try to understand it in this way like present value is the current value of your money, whatever money you would be getting after a certain period,
Or whatever money you are holding right now, the value at the current moment at the current period is the present value.
How this does comes into the picture because of the time value of money, you understand the value of money is not constant, it will change.
Many factors influence the value of your money, it’s, whether you say the inflation rate,
The interest rate or the currency value, everything determines the going period all these things determine the value of money.
What money you are holding right now, the same purchasing power of that money would not remain the same after a certain period.
What is PV and FV in Excel?
Right after say three years, the value of your money may increase or decrease and before three years before five years it wasn’t the same.
This is all because of the fluctuations in the value of money which is because of the period. And this is how present value comes into the picture and we try to figure out what is the present value.
If we are going to get a certain amount of money after a certain period what is its value right?
Now, will it be profitable for us, the PV function comes into the picture and we try to calculate how much benefit we will be getting because someone says,
Like you are having 10,000 rupees and after one to two years, I’ll give you 11 to 12,000. Will it be okay with you?
Because you have to figure out what was the present value of that amount of money at today’s period, then only you can perfectly analyze whether it would be beneficial for you or not.
And see what do you mean by future value is also the worth of an asset in the future, after a specified period.
If you are like holding 3000 rupees and you want to deposit that into the bank and the bank said that it would pay you, 8% of interest rate after five years.
How do you calculate NPV using Excel?
Now, what would be the future value you wanted to calculate how to do that let’s get started with an excellent try to understand how to use these functions. Let me zoom in a little bit
That you can see the picture, try to understand the scenario, we are having a rate of interest that is 10%, and the number of years is five,
And periodic instalment that is annually is 3000 rupees. So just consider like you are paying 3000 rupees for five years.
Every year, and add the interest rate of 10 persons so how much amount of money you would be getting after those five years after your instalment is completed.
We would like to calculate that we would use the function of future value. Just type is equal to FV brackets open.
How do you calculate FV and PV?
Now you have here you can see all the instructions you have to add the interest rate.
Choose the interest rate, comma, the number of periods and P r is denoting the number of years, number of periods.
Here we are having five years, comma, what is the payment the amount, what payment you are making this is the periodic instalment is considered our payment,
And by, I have shown it is negative because it is a cash outflow for you. You understand cash outflow right cash inflow and cash outflow of cash when comes in as inflow when it goes out as outflow.
If you’re making that payment is this an outflow for you. That way I have taken the figure and negative. Present Value window no so we would take it zero,
And the five, we would consider zero and one, as zero indicates the end of the period payment and one indicates the beginning of the period payments
Consider any scenario if you’re making the payment at the end of the period use the zero and if you’re making at the beginning of the period use funds considering zero, we would see what the result we get.
Here is the value amount. Then mean crease, the font size so that you can declare it was realized that. Yeah.
This is what we get. 18,315.30 If you’re making a periodic instalment payment of 3000 rupees for five years at the rate of interest of 10%.
After those five years, you would be getting 18,315.30 rupees. This is how we calculate a simple formula of FV, which we use, is equal to the FV function.
Now, to get out presenting present value, how to go about Just see like we wanted to know what is the present value of the same amount
We would consider the future the value which right now we extracted was 18,315.30 and we would use the same figure to calculate our present value to know what exactly this value is in the current period
Use the formula is equal to, PV brackets open rate of interest again choose 10% number of periods was five years, payment, you are not making any because you are at,
Because you are calculating the future values, calculating the present value so you are unaware of the present payment being made,
Take into consideration the future value, that was tried no we calculated and consider zero, assuming that the payment is being made at the end of the period, close the brackets,
