Course outline / Financial functions
Lesson 68 of 75 · Intermediate · 4 exercises
Savings and growth
Future value, present value, how long a goal takes, and the rate you need.
What you'll practise
- What savings grow to with FV
- What a future sum is worth today with PV
- How many months to reach a goal with NPER
- The growth rate needed with RATE
What savings grow to with FV
FV gives the future value of regular savings that earn interest.
=FV(rate per period, number of periods, payment)
Money you pay in is negative, so put a minus in front of the saving.
**In cell D2, find what 200 a month for 10 years at 5% grows to: FV(B2/12, B3*12, -B1).**
What a future sum is worth today with PV
PV works backwards: how much would you need today to match a stream of future payments?
**In cell D2, find the present value of 200 a month for 10 years at 5%: PV(B2/12, B3*12, -B1).**
How many months to reach a goal with NPER
NPER answers "how long?": the number of periods needed.
=NPER(rate, payment, present value, future value)
In cell D2, find how many months it takes to save the goal in B4, saving B1 a month at B2 a year: NPER(B2/12, -B1, 0, B4).
The growth rate needed with RATE
RATE finds the interest rate per period. To turn 1,000 into 1,500 in 5 years, you need a yearly growth rate of:
=RATE(5, 0, -1000, 1500)
**In cell D2, find the yearly rate that grows the amount in B4 to one and a half times as much over B3 years: RATE(B3, 0, -B4, B4*1.5).**
Try it in a real spreadsheet
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