Excel PV Function

Use:

Computes present value of an annuity

Syntax:

PV( rate , periods , amount , initial , type )

 

Rate is the interest rate (percentage)

Periods is the number of time periods

Amount is the fixed contribution amount each period

Should be positive for periodic receipts

Should be negative for periodic payments

Initial is the initial lump sum

Should be positive for initial receipt

Should be negative for initial payment

Type is an indicator for the timing of the periodic contributions

Type=0 for contributions made at the end of each period

Type=1 for contributions made at the start of each period

Examples:

Simple Annuity: $100 per year invested at 8%

Cell D4 formula:     PV( 0.08 , 5 , -100 , 0 , 1 )

Cell D5 formula:     PV( C9 , C10 , C11 , C12 , C13 )

 

More Examples:

Lump Sum: $750 invested at 8%

Cell D4 formula:     PV( 0.08 , 5 , 0 , -750 , 1 )

Cell D5 formula:     PV( C9 , C10 , C11 , C12 , C13 )

 

Note:

PV does not assume annual time periods. You can use the function to analyze any type of fixed annuity. You must, however, express your interest rate in terms of the length of your time period. That is, if you are using annual periods, then the interest rate must be the annual rate. If, on the other hand, you are using monthly periods, then your interest rate must be the monthly rate.

Related Functions:

FV, IRR