We usually split our incomes into savings, investments, and spendings. So, we would be interested to know how much value our current investments stand for, at a future point in time. The FV formula in Google Sheets is built just for this purpose. Taking into account, the periodic payment amount and the interest rate that doesn’t change over time, it arrives at the future value of an investment.
FV(rate, number_of_periods, payment_amount, [present_value], [end_or_beginning])
- rate – is the rate of interest that doesn’t change over a time.
- number_of_periods – is the number of periodic payments that we are going to make.
- payment_amount – is the constant amount of money that we pay for each period.
- present_value – [ OPTIONAL – 0 by default ] – is the current value of the investment.
- end_or_beginning – [OPTIONAL – 0 by default] – a 0 indicates that we are making the payments at the end of each period. A value of 1 specifies that we are making payments at the beginning of each payment period.
Usage: FV formula in Google Sheets
We just learned the syntax. Let us go ahead and apply it to understand how it works. Please consider the following screenshot.
Using the first three formulas, we calculate the future value of an investment that we are going to pay for 10 periods. The interest rate is 5% and the amount we are paying is 750. While the first and second formulas are essentially representing the same thing, the second formula is a little interesting. All the parameter values in this formula are same, except the last one. So, the value 1 indicates that we are paying up at the end of the period, hence the difference in output.
The second and third formulas produce exactly the same output. That is because, in the former, we used direct numeric values. Whereas in the latter we used cell references where we placed these values.
The veracity of this formula remains intact as long as the payment intervals remain spaced evenly. Regardless of whether we are going to make monthly or even weekly payments, we just have to ensure that we put in the proportionate interest rates. The fourth formula is an example of such calculation, for a monthly based investment series.