Recall that the future value is the value
Recall that the future value is the value

an asset will be worth in the future in terms
an asset will be worth in the future in terms

of future dollars.
of future dollars.

There are three ways to solve for future value--
There are three ways to solve for future value--

using time value of money tables,
using time value of money tables,

using a financial calculator, or using Excel, which
using a financial calculator, or using Excel, which

is really the most common way.
is really the most common way.

This video will show you how to calculate
This video will show you how to calculate

future value using Excel.
future value using Excel.

The formula is equals FV open parenthesis rate,
The formula is equals FV open parenthesis rate,

which is the interest rate, n period, which
which is the interest rate, n period, which

is the number of periods, minus payment, which is
is the number of periods, minus payment, which is

a regular reoccurring amount--
a regular reoccurring amount--

and it's possible that this could be 0,
and it's possible that this could be 0,

because not every scenario has a regular reoccurring amount--
because not every scenario has a regular reoccurring amount--

and finally, minus pv, which is the present value or the amount
and finally, minus pv, which is the present value or the amount

of investment today.
of investment today.

When solving for future value in Excel,
When solving for future value in Excel,

present value or payment is always a negative amount.
present value or payment is always a negative amount.

So let's look at a couple different scenarios,
So let's look at a couple different scenarios,

and I'll show you how to solve them in Excel.
and I'll show you how to solve them in Excel.

For example, a deposit of $10,000
For example, a deposit of $10,000

will grow to what amount under the following conditions?
will grow to what amount under the following conditions?

Let's look at 5 years at 8% interest
Let's look at 5 years at 8% interest

and 5 years at 6% interest compounded quarterly.
and 5 years at 6% interest compounded quarterly.

So using the future value formula,
So using the future value formula,

I enter equals FV open parenthesis 8% comma 5 comma 0,
I enter equals FV open parenthesis 8% comma 5 comma 0,

because there's no regular payment, and minus 10,000
because there's no regular payment, and minus 10,000

close parenthesis.
close parenthesis.

And this returns a future value of $14,693.28.
And this returns a future value of $14,693.28.

Before we do the next scenario, I
Before we do the next scenario, I

want to explain quarterly compounding.
want to explain quarterly compounding.

When we have quarterly compounding,
When we have quarterly compounding,

we need to quarter the annual interest rate.
we need to quarter the annual interest rate.

So the rate isn't 6%, it's 6% divided by 4.
So the rate isn't 6%, it's 6% divided by 4.

And we need to quadruple the number of periods.
And we need to quadruple the number of periods.

So the periods aren't 5, they are 5 times 4.
So the periods aren't 5, they are 5 times 4.

So let's see this in action.
So let's see this in action.

I enter equals FV open parenthesis 6% divided by 4.
I enter equals FV open parenthesis 6% divided by 4.

Then, 5 times 4, 0, because there
Then, 5 times 4, 0, because there

still isn't a payment, and minus 10,000 for the present value.
still isn't a payment, and minus 10,000 for the present value.

This returns a future value of $13,468.55.
This returns a future value of $13,468.55.

So let's look at two more scenarios
So let's look at two more scenarios

where we'll have a payment.
where we'll have a payment.

The first is calculate the future value
The first is calculate the future value

when deposits of $100 per month for 20 years at 5% interest
when deposits of $100 per month for 20 years at 5% interest

are made.
are made.

Since these deposits are monthly,
Since these deposits are monthly,

we need to divide the interest rate by 12
we need to divide the interest rate by 12

and multiply the number of periods by 12.
and multiply the number of periods by 12.

The next is calculate the future value
The next is calculate the future value

when a one-time deposit of $5,000 is made today,
when a one-time deposit of $5,000 is made today,

which is the present value, and $1,000
which is the present value, and $1,000

each year for the next 20 years are made, which are payments.
each year for the next 20 years are made, which are payments.

We'll assume 8% interest for this one.
We'll assume 8% interest for this one.

I enter equals FV open parenthesis 5%
I enter equals FV open parenthesis 5%

divided by 12 comma 20 times 12 comma minus 100,
divided by 12 comma 20 times 12 comma minus 100,

for the payment, comma and 0, for present value,
for the payment, comma and 0, for present value,

since there was no initial one-time amount.
since there was no initial one-time amount.

This results in a future value of $41,103.37.
This results in a future value of $41,103.37.

For this last one I enter equals FV open parenthesis 8% comma 20
For this last one I enter equals FV open parenthesis 8% comma 20

comma minus 1,000, because it's a payment, and minus 5,000.
comma minus 1,000, because it's a payment, and minus 5,000.

This returns a result of $69,066.75.
This returns a result of $69,066.75.

And that's how you use Excel to solve for future value.
And that's how you use Excel to solve for future value.