Calculates the future value of investments based on periodic, constant payments and a constant interest rate. You can also calculate the future value of loan payments. See the examples below.
Where fv = future value, pv = present value, rate = rate per period, nper = number of periods, pmt = payment amount, and type = 1 if payments are made at the beginning of each period or type = 0 if payments are made at the end of each period.
fv = -pv * (1 + rate)^nper - pmt * (1 + rate * type) * [ ((1 + rate)^$nper - 1) / $rate]
See also Excel functions for FV.
Rate per Period is the interest rate for each payment period. Number of Periods is the total number of payment periods. Make sure that you are consistent with the units (months, years or quarters) you use for specifying Rate per Period and Number of Periods.
Payment Amount is the payment made each period. Enter a negative number. If you are paying $263.00 per payment then enter (-263.00).
Present Value is the lump-sum amount that a series of future payments is worth right now. For example, if you borrow $10,000 the present value to you is $10,000. If you are paying the money to a savings account then the present value is the value in the account, money you paid out. (0 if you just opened it).
How to Calculate APR: Acronym for Annual Percentage Rate. The Effective Annual Interest Rate. The actual amount of interest for each year. You should be able to get a basic understanding from Wikipedia for Annual Percentage Rate and Nominal Interest Rate.
You will have to be sure you are using the right interest rate so that the calculations are correct for your situation. See the following explanation.
A loan with a Nominal Interest Rate of 7% compounded monthly will have a higher Effective Annual Interest Rate than a loan with an APR of 7% compounded monthly.
You have $500 savings and will start to save $225 per month in an account that yields 15% per year. You will make your deposits at the end of each month. You want to know the value of your investment in 5 years or, the future value of your savings account.
You took a loan for $10,000 at a Nominal Interest Rate of 15% and want to know how much you will still owe in 4 years if you pay $125 at the end of each month.