FV function
Also written Future value function · Excel FV · FV()
The spreadsheet function that converts a stream of contributions, growing or fixed, into their value at a future date — the tool the workbook uses to project a retirement corpus and future living costs.
In plain language
A client saving Rs 10,000 a month wants to know one thing: what will that money actually be worth by the time they need it? The FV function answers exactly that.
=FV(rate, nper, pmt, [pv], [type])
It is the mirror image of the PV function: PV pulls a future stream back to today's value; FV pushes today's contributions forward to a future value.
How it works
rate — the return per period. Annual contributions growing at an annual return use the annual rate directly.
nper — the number of periods being projected forward. Twenty years to retirement is 20.
pmt — the fixed periodic contribution, entered negative because it is money going out of pocket into the investment.
pv — any lump sum already invested at the start; left blank if starting from zero.
type — 0 or omitted for end-of-period contributions, 1 for the beginning.
The workbook uses FV in two distinct settings: projecting a lump-sum contribution forward at a single rate, and inflating a current expense to find what it will cost at a future date — the same function, with the payment argument left blank and only a present value carried forward.
The formula
=FV(rate, nper, pmt, [pv], [type])
Inflating a current expense to a future date:
=FV(rate, nper, , -current_amount)
Projecting a fixed contribution to a future value:
=FV(rate, nper, -contribution)
A worked example
The workbook's own Chapter 20 case study. Jaspreet, aged 40, has current annual expenses of Rs 6,00,000, expects 8% inflation, and wants to know what those expenses will cost when he retires in 20 years.
=FV(8%, 20, , -6,00,000) = Rs 27,96,574
That figure then feeds into a PV function calculation to size the retirement corpus needed to fund 25 years of retirement at that inflated expense level, using an inflation-adjusted return of 0.93%, giving a corpus requirement of Rs 6.22 crore.
A separate case study uses FV the other way, to project a growing retirement contribution: Rs 9,000 a month, growing 20% a year, invested at 8%, summed year by year to a retirement corpus of Rs 48,65,914 by age 60 — each year's contribution run through its own =FV(8%, years remaining, , -contribution) and added together.
Why NISM asks about it
Chapter 20 (Case Studies) hands you the explicit hint "Use FV function in Excel i.e. FV(Rate,Nper,,PV)" when inflating a living expense to a future date, and uses it in the year-by-year table of Case 1. (Chapter 6's retirement-corpus tables use PV and PMT, not FV.) Expect to be given a current cost, an inflation or growth rate and a number of years, and asked to compute the future value before a further PV or PMT step.
Common exam traps
- The sign convention matters. A present value or payment entered as a positive number, instead of negative, flips the sign of the answer.
- FV projects forward; PV discounts backward. Confusing the two functions on a case-study question is one of the most common errors in this chapter.
- A growing contribution is not one single FV calculation — the workbook's own retirement-corpus table applies FV separately to each year's contribution and sums the results, rather than compounding one fixed payment.
- Match the rate to the period — an annual growth rate with monthly contributions needs converting first.
Check yourself
1.In Case 1, Mr Z is 52, spends Rs 40,000 a month, expects inflation of 10% a year and retires at 60. What annual living expense does the workbook project for the year he retires?
- a)Rs 4,80,000
- b)Rs 8,64,000
- c)Rs 10,28,923
- d)Rs 11,31,815
Show the answer
Answer: (c) Rs 10,28,923
The workbook's Calculation 4 first annualises the expense and then inflates it to retirement:
Particulars Amount Calculation Living expenses (at the age of 52) Rs 4,80,000 "Expenses @ Rs.40,000 per month" Year to retire 8 60 − 52 = 8 Inflation (given) 10% Living expense (at retirement) Rs 10,28,922.63 =FV(10%,8,,-480000) Rs 4,80,000 × 1.10^8 = Rs 4,80,000 × 2.14359 = Rs 10,28,923. This is the first year's expense the retirement corpus must pay for. The corpus is then worked out on it with =PV(0.91%,15,-1028922.63,,1).
Option A is wrong because Rs 4,80,000 is today's expense (Rs 40,000 × 12). It ignores eight years of 10% inflation.
Option B is wrong because it adds simple inflation: Rs 4,80,000 + 8 × Rs 48,000 = Rs 8,64,000. The workbook compounds, which is what the FV function does.
Option D is wrong because it compounds for 9 years (Rs 4,80,000 × 1.10^9 ≈ Rs 11,31,815). The case fixes the zero date at the end of age 52 and the retirement at 60, so there are 8 years to retirement.
2.Case 1 puts Mr Z's retirement corpus at Rs 12 lakhs at the end of age 52, entirely in debt yielding 8% a year. In the workbook's corpus table, how much does this Rs 12 lakh alone grow to by age 60?
- a)Rs 19,68,000
- b)Rs 12,96,000
- c)Rs 23,98,805
- d)Rs 22,21,116
Show the answer
Answer: (d) Rs 22,21,116
The workbook's Table 1 (Total Retirement Corpus Calculation) shows the Rs 12,00,000 corpus at age 52 with a future value at age 60 of Rs 22,21,116, computed as "=FV(8%,Year to Retirement,,-Contribution towards retirement corpus)" with 8 years to retirement.
Rs 12,00,000 × 1.08^8 = Rs 12,00,000 × 1.85093 = Rs 22,21,116.
The yearly contributions (Rs 9,000 a month growing 20% a year) are compounded the same way, each for its own remaining years. Adding every future value gives the total corpus at retirement of Rs 48,65,914. So the existing Rs 12 lakh supplies close to half of the final corpus.
Option A is wrong because it applies simple interest: Rs 12,00,000 + 8 × Rs 96,000 = Rs 19,68,000. The FV function compounds.
Option B is wrong because Rs 12,96,000 is only one year's growth at 8%.
Option C is wrong because it compounds for 9 years (Rs 12,00,000 × 1.08^9 ≈ Rs 23,98,805). The zero date is the end of age 52 and retirement is at 60, so the corpus has 8 years to grow.
3.Jaspreet, 40, spends Rs 50,000 a month and plans to retire at 60. Inflation is 8%. In the workbook's solution, what is the future value of his annual living expenses at the start of retirement?
- a)Rs 6,00,000
- b)Rs 15,60,000
- c)Rs 27,96,574
- d)Rs 30,20,300
Show the answer
Answer: (c) Rs 27,96,574
The workbook: "Future value of living expenses at retirement Rs.27,96,574.29 (This is the amount required to meet annual living expenses at the start of retirement at 60 years) [Hint: Use FV function in Excel i.e. FV(Rate,Nper,,PV). =FV(8%,20,,-600000)]".
Rs 50,000 × 12 = Rs 6,00,000 today. Over 60 − 40 = 20 years at 8%: Rs 6,00,000 × 1.08^20 = Rs 6,00,000 × 4.66096 = Rs 27,96,574.
This figure then becomes the payment in =PV(0.93%,25,-2796574.29), which gives the corpus of about Rs 6.2 crores.
Option A is wrong because Rs 6,00,000 is today's annual expense. It ignores 20 years of inflation.
Option B is wrong because it uses simple inflation: Rs 6,00,000 + 20 × Rs 48,000 = Rs 15,60,000.
Option D is wrong because it compounds for 21 years (Rs 6,00,000 × 1.08^21 ≈ Rs 30,20,300). The period to retirement is 60 − 40 = 20 years.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- PMT functionThe spreadsheet function that converts a target corpus into the fixed periodic saving needed to reach it — the arithmetic behind every "how much should I invest a month" answer.
- PV functionThe spreadsheet function that converts a stream of future payments into the single lump sum needed today — the tool the workbook uses to size a retirement corpus and a life insurance cover.
- Time value of moneyThe principle that the same sum of money is worth different amounts at different points on a timeline, because money held today can be invested and because inflation erodes what it will buy.