Mr A plans to invest 100000 every year for 15 years (he will withdraw money at the end of 15 years) and is expecting a return of about 12%.
I know the FV function of excel but how to use it ?
The future value is found by summing compounded deposits
fv = Σ(1 + r)^k for k = 1 to n
∴ by induction the future value formula is
fv = (d (1 + r) (-1 + (1 + r)^n))/r
Using the OP's figures
d = 100000 r = 0.12 n = 15 fv = (d (1 + r) (-1 + (1 + r)^n))/r = 4175328.04
=FV(rate, nper, pmt, [pv], [type])
type - [optional] When payments are due. 0 = end of period, 1 = beginning of period. Default is 0.
Savings deposits are usually made at the beginning of the period.
=FV(0.12, 15, 100000, 0, 1)
In the unlikely case that Mr A plans to invest at the end of each year, in which case he would withdraw money at the same time as making the last deposit, use
=FV(0.12, 15, 100000)
fv = Σ(1 + r)^(k - 1) for k = 1 to n ∴ fv = (d (-1 + (1 + r)^n))/r = 3727971.47
The summation can also be written in Excel like so
It looks like the following should also work but it doesn't.
If anyone can suggest why that would be interesting.