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excel – compound interest with continuing contribution

Posted by: admin May 14, 2020 Leave a comment

Questions:

Looking for an excel formula that will apply compound interest and will allow me to add a continuous contribution for “x” amount of years.

i.e. $10,000 contribution at 10% yearly interest every year. I contribute $10,000 every year for the next 35 years. What will the account value be?

How to&Answers:

I believe the FV() formula would be what you’re looking for.

=FV(10%,35,-10000)

Keep in mind, there are variations to this formula.

  • 10% assumes you only make one payment a year. If you pay 12 times a year, use 10%/12.
  • 35 is the total number of years. This doesn’t change even if you change the above.
  • -10000 is your 10k / year payment

Here’s where it can get interesting. Here are some optional arguments for you:

  • Pv: Present Value. (Use if you are starting the account with > $0 in it)
  • Type: If the “payment period” is up front of the period, then place a 1 here, otherwise omit it)

Here’s an example for $10,000 a year in monthly payments (12/year), using 1 because the payments are at the start of the month(period), not the end.

=FV(10%/12,35,-10000,,1)