What savings grow to with FV
In B5, work out what the savings grow to with FV: the monthly rate, the number of months and the monthly deposit as money going out, FV(B3/12,B4*12,-B2).
| A | B | C | D | E | F | |
|---|---|---|---|---|---|---|
| 1 | Savings plan | Value | ||||
| 2 | Saved each month | 500 | ||||
| 3 | Interest rate per year | 0.04 | ||||
| 4 | Years | 10 | ||||
| 5 | Balance at the end | |||||
| 6 | ||||||
| 7 | ||||||
| 8 |
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Why this works
FV, future value, adds up every deposit with the interest it earns until the end. 120 deposits of 500 is 60,000 of your own money; at 4% a year, compounded monthly, the balance reaches 73,624.90. The rate and the number of periods must both be monthly, as in PMT.
Common mistake: Leaving the deposit positive. FV then shows the balance as a negative number, because it treats the deposits as money you receive.
The answer
- B5
=FV(1B3/12,2B4*12,3-B2)
In plain words: What 3monthly deposits of the amount in B2 grow to over 2the years in B4, counted in months at 1the annual rate in B3, split into months.
=FV(yearly rate/12, years*12, -monthly deposit), for example =FV(4%/12,10*12,-500).
Give FV a fourth argument, the starting balance, also negative, =FV(B3/12,B4*12,-B2,-10000).
+15 points