CFA® Program exam: Time Value of Money excel tutorial

19 Oct 2018

 In this step-by-step tutorial, we walk you through calculating the time value of money using values in an Excel spreadsheet.

 

 

Consider the following question: If you put $100 in the bank today, at an interest rate of 5%, how much would you have after three years?

 

To find the answer, it is possible to use an Excel formula to derive the future value of the money, or double-check your answer if you calculated it on a calculator.

 

 

First, label one row as present value, or PV.

 

PV - $100

 

Second, consider the time, represented by nper, or the number of periods.

 

PV - $100

Nper - 3

 

Next, consider the interest rate.

 

PV - 100

Nper - 3

Rate - 5%

 

To find the future value of the money, insert the formula fx = FV(0.05,3,100) in the relevant Excel table to get:

 

PV - $100

Nper - 3

Rate - 5%

FV - $115.76

 

For a step by step explanation, watch the short video below.

 

 

About the Author

 

Chua I Min, CFA, is a trainer for AB Maximus’s CFA® Program exam prep course. He is the author of 2 books on share investing and real estate analysis, and founder of the website Invest Coach. He previously worked for PhillipCapital.

 

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