Examining Investment Value with Excel 2010's PV and FV Functions
The most common financial functions in Excel 2010 — PV (Present Value) and FV (Future Value) — use the same arguments. The key to using these financial functions is to understand the terminology used by their arguments:
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PV is the present value, the principal amount of the annuity.
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FV is the future value, the principal plus interest on the annuity.
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PMT is the payment made each period in the annuity. Normally, the payment is set over the life of the annuity and includes principal plus interest without any other fees.
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RATE is the interest rate per period. Normally, the rate is expressed as an annual percentage.
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NPER is the total number of payment periods in the life of the annuity. You calculate this number by taking the Term (the amount of time that interest is paid) and multiplying it by the Period (the point in time when interest is paid or earned) so that a loan with a three-year term with 12 monthly interest payments has 3 x 12, or 36 payment periods.
When using financial functions, keep in mind that the fv, pv, and pmt arguments can be positive or negative, depending on whether you're receiving the money or paying out the money. Also keep in mind that you want to express the rate argument in the same units as the nper argument, so that if you make monthly payments on a loan and you express the nper as the total number of monthly payments, as in 360 (30 x 12) for a 30-year mortgage, you need to express the annual interest rate in monthly terms as well.
Calculating the present value (PV)
The PV function returns the present value of an investment, which is the total amount that a series of future payments is worth presently. The syntax of the PV function is as follows:
=PV(rate,nper,pmt,[fv],[type])
The fv and type arguments are optional. The fv argument is the future value or cash balance that you want to have after making your last payment. If you omit the fv argument, Excel assumes a future value of zero. The type argument indicates whether the payment is made at the beginning or end of the period: Enter 0 (or omit the type argument) when the payment is made at the end of the period and use 1 when it is made at the beginning of the period.
The following figure contains several examples using the PV function. All three PV functions use the same annual percentage rate of 7.25 percent and term of 10 years. Because payments are made monthly, each function converts these annual figures into monthly ones. For example, in the PV function in cell E3, the annual interest rate in cell A3 is converted into a monthly rate by dividing by 12 (A3/12) and the annual term in cell B3 is converted into equivalent monthly periods by multiplying by 12 (B3*12).

Using the PV function to calculate the present value of various investments.
Determining the future value (FV)
The FV function calculates the future value of an investment. The syntax of this function is:
=FV(rate,nper,pmt,[pv],[type])
The rate, nper, pmt, and type arguments are the same as those used by the PV function. The pv argument is the present value or lump-sum amount for which you want to calculate the future value. As with the fv and type arguments in the PV function, both the pv and type arguments are optional in the FV function. If you omit these arguments, Excel assumes their values to be zero.
You can use the FV function to calculate the future value of an investment, such as an IRA (Individual Retirement Account). For example, suppose that you establish an IRA at age 43 and will retire 22 years hence at age 65 and that you plan to make annual payments into the IRA at the beginning of each year. If you assume a rate of return of 8.5 percent a year, you would enter the following FV function in your worksheet:
=FV(8.5%,22,-1000,,1)
Excel then indicates that you can expect a future value of $64,053.66 for your IRA when you retire at age 65. If you had established the IRA a year prior and the account already has a present value of $1,085, you would amend the FV function as follows:
=FV(8.5%,22,-1000,-1085,1)
In this case, Excel indicates that you can expect a future value of $70,583.22 for your IRA at retirement.

Excel Glossary
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The worksheet cell that contains the cell cursor. Each worksheet can have only one active cell.

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A feature that looks at the entries that you make in a worksheet column and automatically duplicates them in subsequent rows whenever you start a new entry that begins with the same letter or letters as an existing entry in that column.

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A feature that alerts Excel 2007 to common typing errors and your own typing errors (that you specify) and tells the program how it should automatically fix them for you.

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cell
The intersection of a column and row in the worksheet.

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cell address
The cell identifier, determined by its column letter(s) followed by the row number, as in cell A1, the very first cell of each worksheet at the intersection of column A and row 1.

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cell cursor
The black border that surrounds the active cell in a worksheet.

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clip art
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A utility in Excel 2007 and 2010 that you use to find potential compatibility issues if you plan to save an Excel workbook file in the older Excel 97–2003 file format.

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current cell
The worksheet cell that contains the cell cursor. Each worksheet can have only one current cell.

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data table
A range of cells in a worksheet in which you enter a series of possible values that Excel plugs into a formula so you can perform what-if analysis on the data.

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dialog box
A rectangular window with settings and commands that appears when you click a dialog box launcher or certain other commands on the Ribbon.

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dialog box launcher
A small icon in the lower-right corner of a group of command buttons on the Ribbon that you click to access a dialog box with additional related settings and commands.

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function
A part of a formula that takes a number of specific arguments and then returns a single value based on those arguments.

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gallery
A drop-down list of thumbnail selections that appears when you click certain command buttons on the Ribbon.

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group
A section of a tab on the Excel 2007 Ribbon that organizes related command buttons into subtasks normally performed as part of the tab's larger core task. The name of a group appears at the bottom of the group, such as the Font group on the Home tab.

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hyperlink
Specially formatted text that anyone can click to jump to Web sites, move to other cells or workbooks, or create an e-mail message.

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keyboard shortcuts
A combination of keys that you can press to execute certain commands, as opposed to finding and clicking the commands' buttons on the Ribbon or elsewhere.

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Live Preview
A feature in Excel 2007 that enables you to point to thumbnails on a drop-down gallery to see how a new font, font size, table style, or cell style would look on your selected data before you actually apply it.

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macro
A series of commands or actions in Excel that are recorded and saved together in a file. You can run the macro whenever you need to perform the task.

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The left-most section of the Formula bar that displays the address or name of the current cell.

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pivot table
A special type of table unique to Excel 2007 that enables you to summarize large amounts of data and pivot or rearrange the table's data to display different summaries of the information it contains.

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Ribbon
A new feature of the Excel 2007 interface that replaces the menus and toolbars of previous versions; appears at the top of the Excel window, just below the title bar.

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ScreenTip
A small window that displays descriptive text when you point to but don't click a command on the Ribbon or other objects in a worksheet.

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sheet tabs
Small tabs near the bottom of a worksheet that you click to move between the worksheets in a workbook. You can assign descriptive names to sheet tabs.

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slicers
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SmartArt
A type of graphic object in Excel 2007 that gives you the ability to quickly and easily construct graphical lists and diagrams in the worksheet.

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sparklines
Tiny graphs (miniature charts) that fit within a single cell in the worksheet, used to show basic trends in data.

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Status bar
A horizontal bar that appears at the bottom of the Excel 2007 window and keeps you informed of Excel's current mode. In addition, you can use the Status bar to select a new worksheet view and to zoom in and out on the worksheet.

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tabs
The various "pages" of Excel 2007's Ribbon interface that you click to display command buttons relating to the tab's name, such as Page Layout and Formulas.

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template
A pre-designed worksheet that can be used as a basis for creating new worksheets.

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WordArt
Stylized text objects that you use to add pizzazz and emphasis to headings and other text in Excel 2007 worksheets.

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workbook
The basic file type that you create when you use Excel 2007. A new workbook consists of three worksheets by default.

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worksheet
The main document that you work in when you enter data into cells within Excel 2007. A worksheet is stored in a workbook file.

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worksheet area
The portion of an Excel 2007 worksheet in which you enter cell data and add objects such as charts and graphics.

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XPS XML Paper Specification
A file format developed by Microsoft that enables people to open and print documents in XPS Reader without access to the original programs with which the documents were created (such as Excel).

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Zoom slider
An object on the Status bar in Excel 2007 that enables you to increase the magnification in a worksheet or shrink it down to get an overall picture of the worksheet data.