Increasing payment in future value formula?
 

Can I use an increasing payment in a future value formula in 2002 Excel?

Answer: Increasing payment in future value formula?
 

Yes, you can use an increasing payment in a future value formula in Excel 2002.

The formula you would use is called the FV function, which calculates the future value of an investment based on a series of regular payments and a constant interest rate.

To include an increasing payment in the formula, you can use the PMT function to calculate the payment for each period.

Here's an example of how to use the FV function with an increasing payment:

1. In a new Excel worksheet, enter the initial investment amount in cell A1, the interest rate in cell A2, and the number of periods in cell A3.
2. In cell A4, enter the formula =PMT(A2,A3,-1,1), which calculates the payment for each period based on the interest rate and number of periods.
3. In cell A5, enter the formula =FV(A2,A3,A4,-A1), which calculates the future value of the investment based on the interest rate, number of periods, payment amount, and initial investment.
4. To include an increasing payment, you can adjust the PMT formula to include an additional argument for the rate of increase. For example, if you want the payment to increase by 5% each period, you can use the formula =PMT(A2,A3,-1,1,0.05).
5. Once you have adjusted the PMT formula, you can use the same FV formula as before to calculate the future value of the investment with the increasing payment.

Remember to adjust the formulas as needed for your specific investment scenario, and to double-check your inputs and calculations to ensure accuracy.

No you can't. FV assumes a constant payment. The formula to calculate the
future value of a payment invested at i% increasing j% every period is:

FV=PMT * ((1+i)^n - (1+j)^n) / (i-j)

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Regards,
Fred
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"AXPJESTER" wrote in message
...
Can I use an increasing payment in a future value formula in 2002 Excel?

Increasing payment in future value formula?
 

Yes you can but you need to write it yourself. the Present Value function for
increasing payments is:

PV*(1+r)^n + pmt*((1+r)^n - (1+i)^n))/(r-i) + FV = 0

whe
i = rate of pmt increase per period
r = interest rate per period
n = number of payment periods
pmt = payment made each period
FV = Future value after last paytment is made

If payment is fixed, or i=0, then the formula becomes the familiar

PV*(1+r)^n + pmt*((1+r)^n - 1)/r + FV = 0

as documented in the excel PV function

Payment at month j is:

pmt*(1+i)^j

Let me know if you have any questions or comments. I would be glad to show
how I derived this formula


"AXPJESTER" wrote:

Can I use an increasing payment in a future value formula in 2002 Excel?

Before using this formula

PV*(1+r)^n + pmt*((1+r)^n - (1+i)^n))/(r-i) + FV = 0

you should check for r==i, to avoid division by 0. If r==i, use

PV*(1+r)^n + pmt*n*(1+r)^(n-1) + FV = 0

You can also think of this as a graduated annuity. To get the fv first calculate the pv as follows:

pv = PV((1+r)/(1+g)-1, n, pmt)/(1+g)
fv = FV(r, n, 0, pv)

where

r = discount rate (interest rate)
g = growth rate of the payments
pmt = first payment amount
n = number of payments