Future Values 43

We used Excel to create Figure 2-1, which summarizes the four methods for finding the FV. Note that spreadsheets can be used to do calculations, but they can also be used like a word processor to create exhibits like Figure 2-1, which includes text, drawings, and calculations. The letters across the top designate columns, the numbers to the left designate rows, and the rows and columns jointly designate cells. It is a good practice to put a problems inputs in the same section. For example, in Figure 2-1, C14 is the cell where we specify the _$100 investment, C15 shows the interest rate, and C16 shows the number of periods. Drawing a time line is an important step in solving finance problems. When we work a problem by hand we usually draw a time line. When we work a problem in Excel, we usually put in a time line. For example, in Figure 2-1 the time line is in Rows 17 to 19. Notice how easy it is in Excel to put in a time line, with each column designating a different period on the time line. In Row 21 we have Excel go through the step-by-step calculations, multiplying the beginning-of-year values by (1 _ I) to find the compounded value at the end of each period. Cell G21 shows the final result of the step-by-step approach. We illustrate the formula approach in Row 23, using Excel to solve Equation 2-1 and find the FV. Cell G23 shows the formula result, $115.76. Rows 25 to 27 illustrate the inputs and result from using a financial calculator. The last section of Figure 2-1 illustrates Excels FV function. You can access the function wizard by clicking the fx symbol in Excels formula bar, or you can go to the menu bar, select Insert, and then select Function from the drop-down menu. Select the category for Financial functions, and then select the FV function. The function is _FV(I,N,0,PV), as shown in Cell E29.4 Cell E30 shows how the formula would look
See FM12 Ch 02 Tool Kit.xls for all calculations.

Summary: Future Value Calculations

Figure 2-1
4The

third entry in the FV function is zero in this example, to indicate that there are no periodic payments. Later in this chapter we will use the function in situations where we do have periodic payments.