How To Calculate The Future Value Of Money (By Hand) In Excel Explained - Future Value Formula

In this video we discuss how to calculate the future value of money in excel by creating a formula. We go through a detailed example step by step of the process

Transcript/notes
Here is the formula for calculating the future value of an investment.
In this formula, present value represents the value today of an amount, r represents the yearly interest rate, n represents the number of compounding periods per year and t represents the time in years.

As an example, let’s say that someone invests $2000 in an account that pays 7.5% interest per year. The interest is compounded quarterly, so 4 times per year. What is the future value amount after 5 years?

As you see, I have listed the values in cells, so we can reference them when we enter the future value formula into excel.

Now, were going to calculate the future value and put the answer in cell D2, so we left click on cell D2, so it is highlighted. Next, we type in an equals sign. Referring to the formula, we first need left click on the present value amount, cell B2. Next, we type in a multiplication sign, which is shift 8 on the keyboard.

From here, we type in an open parenthesis, then we type in a 1, then we type in a plus or addition sign. Next, we left click on the yearly rate amount, cell B3, then we type in a division sign, which is a forward slash in excel. From here, we left click on the number of compounding periods per year, cell B4, then we type in a closed parenthesis to close off the 1 plus r over n portion of the formula.

Now we type in a power symbol, which is called a carrot symbol in excel, which is shift 6 on the keyboard. Next, we type in an open parenthesis and then we left click on the number of compounding periods per year, cell B4. From here, we type in a multiplication sign and then we left click on the number of years, cell B5. Next, we type in a closed parenthesis to close off the n times t portion of the formula, and then we hit the enter key, and we have our answer of $2899.90.

Chapters/Timestamps
0:00 Example set up and future value formula
0:24 Start of formula in excel
1:40 Answer

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