Interest And Equivalence

Transcript Area

In this Excel tutorial I'm going to be talking about future value. The information that we have is, say you deposited a dollar away, it earned 3 percent interest and you're going to move it forward one period. You can actually calculate your future value using your formula for future value. At any time, you can program a formula into Excel. In this one it simply equals present, which was B2 times 1 plus I, which is B3, raise to, and to do a raise to it shifts six so you get the little caret, the end. Hit return and you can see you get a $1.03.

Now, you could also in this one Excel has a formula for this. Excel, the formula for this is equals FV, notice it gives a little definition here that returns the future value of an investment, start your parentheses, it asks for your rate which was 3 percent, comma nper was n comma. I don't have a payment so I just hit comma again notice how it's bolding through each of these.

I have to do a negative B2, because remember a deposit is an arrow down and simply close out my parentheses and hit return and you can see that I get the same $1.03. What's really great about this is that if I change my n to 5, notice it automatically updates either formula, changed my interest rate to 5 percent, automatically updates either formula. What you would like to get into a habit of doing is actually using the functions and formulas that Excel has.

They are easy, they are fast. Putting an actual formula in like this can be a little tougher because these formulas get way more complex as you're moving through to like gradients and things. So you can put a formula in a desperate situation when you can't find a function, but if you can find a function please go within an Excel, it makes your life a lot easier. In this tutorial I've shown how you can do future value with an actual formula or using a function from Excel.