Question

Suppose that you deposit? $10,000 in an account that pays? 6% interest and you want to know how much will be in your account at the end of 10 years. To solve this problem in Microsoft? Excel, you would use which of the following Excel? formulas?

=FV?(.06,10,0,10000)

B.

?=PV?(.06,10,0,10000)

C.

?=PV?(.06,10000,0,10)

D.

?=FV?(.06,10000,0,10)

Answer 1

The answer to the above question is option (a)

=FV(0.06,10,0,10000) is the formula to be used to determine the value that will be in the account at the end of 10 years where deposit is $ 10,000 and interest is paid @ 6%.

In Excel the formula is as under:-

=FV(Rate, Total Payment Period, No. of payments made during each period, Total Present Value)

In the given scenario each variable is assigned the value as follows:-

Rate = 6% i.e. 0.06

Total Payment Period = 10 years

Payment made during each period = 0 (As the amount will be paid after 10 years and not during the entire period of 10 years)

Present Value = $ 10,000 (The amount deposited in the account as on today)