You can use FV Function to calculate the future value of an investment. An investment which is based on periodic and constant payments and on a constant rate of interest.
In simple words, it will return a future value of an investment where you have constant payments and constant interest rate throughout the investment period.
In the below example, I have used 10% interest rate, 5 payments on a yearly basis, $1000 payment amount, no PV amount and payment type at the beginning of the period.
The function has return 6716 in the result.
Let me explain you the phenomena working behind FV Function. At the beginning of each period, it will calculate the interest on payment and carry forward that amount (Actual Amount + Interest)to the next period. And, in next period again same calculation will be done and so on.
The best part of FV Function is that it can do this step by step calculation for you in a single cell.
In above example, I have used monthly payments. For this, I have converted annual interest rate into month by dividing by 12. And, I have mentioned 60 months instead of 5 years.
In PV, I have specified 10000 for payment. And, the function has returned $94536.
You can also use Excel FV Function to calculate compound interest. Rather than specifying periodic payment amounts, I have specified pv, as payment is already done. Learn more about calculating compound interest on different Basis.
To learn more about Excel FV Function you can check Microsoft’s Help Section. And, if you have a unique idea to use it, I would love to hear from you.