# How to Use Investment or Annuity In Excel

Oct 31, 2020 • edited Nov 03, 2020 This example teaches you how to calculate the future value of an investment or the present value of an annuity.

Tip: when working with financial functions in Excel, always ask yourself the question, am I making a payment (negative) or am I receiving money (positive)?

### Investment

Assume that at the end of every year, you deposit \$100 into a savings account. At an annual interest rate of 8%, how much will your investment be worth after 10 years?

1. Insert the FV (Future Value) function. 2. Enter the arguments. In 10 years time, you pay 10 * \$100 (negative) = \$1000, and you'll receive \$1,448.66 (positive) after 10 years. The higher the interest, the faster your money grows.

Note: the last two arguments are optional. If omitted, Pv = 0 (no present value). If Type is omitted, it is assumed that payments are due at the end of the period.

### Annuity

Assume you want to purchase an annuity that will pay \$600 a month, for the next 20 years. At an annual interest rate of 6%, how much does the annuity cost?

1. Insert the PV (Present Value) function. 2. Enter the arguments. You need a one-time payment of \$83,748.46 (negative) to pay this annuity. You'll receive 240 * \$600 (positive) = \$144,000 in the future. This is another example that money grows over time.

Note: we receive monthly payments, so we use 6%/12 = 0.5% for Rate and 20*12 = 240 for Nper. The last two arguments are optional. If omitted, Fv = 0 (no future value). If Type is omitted, it is assumed that payments are due at the end of the period. This annuity does not take into account life expectancy, inflation etc.

#Tutorial#How To#Functions#Financial

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