How to Calculate the Future Value of an Investment Using Excel

Video Transcript

"Hi, may name is Dave Andrews. Today I'm going to show you how to calculate the future value of an investment using Microsoft Excel. Let's open up Excel and we're going to click on our start button. Go to all programs. We're going to go to Microsoft Office, let's just open up Excel. Now let's say for instance, for instance that you're going to be depositing sum money into a savings account in a bank. So I'm going to show you a basically a simple formula that you're going to run to calculate how much your investment will be worth in a certain number of years. So let's insert a function by doing, hitting this little f of x, right here in Excel for insert function. That brings up a search screen. We're going to search for the function FV and type go. FV means future value; let's select FV in the returns and press okay. Now this brings up the function argument screen. Let's say that our bank is going to give us a return of 2% per month which is a, a huge return. So what we do to calculate that 2% per month; it will be 2%, just type in 2% and then divided by 12 'cause that's a monthly percentage rate increase. Now the Nper is the total number of payments that you're going to make. So if we want to, say, what this is going to be worth in five years doing monthly payments; we'll do 5 X 12 'cause there's five or twelve months in a year. And we're going to do five years worth, so it's basically sixty months that we're going to be paying. Now this is going to, this Pmt value is the payment that you're going to make per month. And you do this in a negative, so you'll type negative because it's a payment, that's the way Excel handles payments in its functions. We're going to type, let's say we'll do a -$150 a month. So basically, we're paying the bank $150, so we do -150. We'll press okay. As you can see the future value of our investment in five years at a 2% return per month, paying a $150 a month is going to be $9,457.10. This is Dave Andrews and I've just showed you how to calculate the future value in investment using Excel."