Calculating the future value of an investment in an Excel spreadsheet is simple if you know what formula to use.
Example: Let’s say you want to invest $15,000 in a 48 month certificate of deposit (CD) that pays 5.4% annual interest. How much money will you have at the end of the 48 months?
To calculate how much money your initial investment will grow using Excel, simply enter this formula into any empty cell in a new worksheet:
How this Excel Formula Works:
= The “=” sign lets Excel know that a formula is being entered in the cell.
15000 This is the initial investment (you don’t need to put a $ sign in front of it if you don’t want to).
* This symbol is the multiply symbol (shift 8). It tells Excel you want to multiply the previous value by another value.
1.0045 This is where this formula gets a little tricky. Although the interest rate is 5.4% per year, we need to figure out what the monthly interest rate is. To do this simply divide 5.4% by 12 = .0045.
^ This means to multiply by “the power of” whatever number follows it. In other words, 2^3 asks Excel to figure out what 2 multiplied by itself 3 times is (2*2*2=8).
48 This is the number of months that interest is compounded on the original investment.
Once you’re finished typing the formula in click “enter” on the keyboard and you’ll get your result.
In this example our investment has grown to =15000*1.0045^48 =