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2006-11-20, 20:20 #1
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- May 2002
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PV (and FV) Functions (Excel 2003)
Just a simple question which probably has a simple answer that I can't immediately put my finger on. One of the uses of PV is to find out how much you need to invest each month to reach a goal at the end of the Nper (this uses Fv but not PMT arguments). As I understand it, the other use is the opposite; if you invest a certain amount of money (say $2000) each month for 36 months at 5% interest, how much is that investment worth now. Using the PV function, the result is $66,731.40. Shouldn't the investment return be worth at least what you put into it (2000 X 36 or $72,000)? Why is the result lower than the actual money invested. Thanks in advance for any info.
2006-11-20, 20:32 #2
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- Mar 2002
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Re: PV (and FV) Functions (Excel 2003)
You can view it in two ways:
- How much can you loan from the bank if you pay $2,000 a month for 36 months at 5% yearly interest? You can loan less than 36*$2,000 = $72,000 because you pay the interest to the bank.
- How much do you have to pay now if you want to receive $2,000 a month for 36 months at 5% yearly interest? This is less than $72,000 because part of what you receive is interest.