## What Is the Time Value of Money?

The money that you have today is worth more than money you will receive in the future.

## Parameters to Calculate Time Value of Money

**pv****→ pv**the**Present Value**or the amount of money you currently have.**fv →****fv**the**Future Value**of the money that you currently have.**nper → nper**represents the**Number of Periods**:**Annually**,**Semi-Annually**,**Quarterly**,**Monthly**,**Weekly**,**Daily**etc.**rate → rate**is the**Interest Rate Per Year**.**pmt → pmt**indicates**Periodic Payments**.

In the Excel formula, the signs of*Note:***PV**and**FV**are opposite.**PV**is negative and**FV**is positive.

## Example 1 – Using the FV Function to Calculate the Future Value of Money in Excel

In the following dataset, initial investments (**Present Value**), the **Annual Rate**, and the **Number of Years** are displayed.

### 1.1 Future Value Without a Periodic Payment

__Steps:__

- Enter the following formula in
**F5**.

`=FV(E5,D5,0,-C5,0)`

Here,

**E5** → **rate
**

**D5**→

**nper**

**0 → pmt**

**-C5 → pv**

**0**→

**0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

**Read More:** How to Calculate Periodic Interest Rate in Excel

### 1.2 Future Value with Periodic Payments

__Steps:__

- Enter the following formula in
**G5**.

`=FV(F5,D5,-E5,-C5,0)`

Here,

**F5 → rate
**

**D5 → nper**

**-E5 → pmt**

**-C5 → pv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

**Read More: **How to Apply Future Value of an Annuity Formula in Excel

## Example 2 – Computing the Present Value of Money with the PV Function

In the following dataset, **Future Value**, **Annual Rate**, and **Number of Years** are displayed.

### 2.1 Present Value Without Periodic Payments

__Steps:__

- Enter the formula below in
**F5**.

`=PV(E5,D5,0,-C5,0)`

Here,

**E5 → rate
**

**D5 → nper**

**0 → pmt**

**-C5 → fv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

### 2.2 Present Value with Periodic Payments

__Steps:__

- Use the following formula in
**G5**.

`=PV(F5,D5,E5,-C5,0)`

Here,

**F5 → rate
**

**D5 → nper**

**E5 → pmt**

**-C5 → fv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

**Read More: **How to Apply Present Value of Annuity Formula in Excel

## Example 3 – Calculating the Interest Rate with the RATE Function in Excel

In the dataset given below, **Present Value**, **Future Value**, and **Number of Years **are displayed.

### 3.1 Interest Rate Without Periodic Payments

__Steps:__

- Enter the following formula in
**F5**.

`=RATE(D5,0,E5,-C5,0)`

Here,

**D5 → nper
**

**0 → pmt**

**E5 → pv**

**-C5 → fv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

### 3.2 Interest Rate with Periodic Payments

__Steps:__

- Use the formula below in
**G5**.

`=RATE(D5,-E5,-F5,C5,0)`

Here,

**D5 → nper
**

**-E5 → pmt**

**-F5 → pv**

**C5 → fv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

**Read More: **How to Calculate Present Value of Future Cash Flows in Excel

## Example 4 – Computing the Number of Periods with the NPER Function

The following dataset showcases **Present Value**, **Future Value**, and **Annual Rate**.

### 4.1 Number of Periods Without Periodic Payments

__Steps:__

- Enter the following formula in
**F5**.

`=NPER(D5,0,-E5,C5,0)`

Here,

**D5 → rate
**

**0 → pmt**

**-E5 → pv**

**C5 → fv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

### 4.2 Number of Periods with Periodic Payments

__Steps:__

- Enter the following formula in
**G5**.

`=NPER(D5,-E5,-F5,C5,0)`

Here,

**D5 → rate
**

**-E5 → pmt**

**-F5 → pv**

**C5 → fv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

**Read More: **How to Calculate Present Value in Excel with Different Payments

## Example 5 – Using the PMT Function to Determine a Payment Per Period

In the dataset below, **Present Value**, **Annual Rate**, **Number of Years**, and **Future Value** are displayed.

### 5.1 Payment Per Period for a Zero Future Value

__Steps:__

- Enter the formula below in
**G5**.

`=PMT(D5,F5,-C5,0,0)`

Here,

**D5 → rate
**

**F5 → nper**

**-C5 → pv**

**0 → fv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

### 5.2 Payment Per Period for a Non-Zero Future Value

**Steps:**

- Enter the following formula in
**G5**.

`=-PMT(D5,F5,-C5,E5,0)`

Here,

**D5 → rate
**

**F5 → nper**

**-C5 → pv**

**E5 → fv**

**0 → 0**means payment is timed at the

**end of the period**.

- Press
**ENTER**.

** Note:** The negative sign is used before the function, not to be displayed in the output.

This is the output.

- Drag down the Fill Handle to see the result in the rest of the cells.

**Read More: **How to Calculate Future Value in Excel with Different Payments

## How to Create a Time Value Money Table in Excel

### 1. Create a PVIF Table

- Enter your data in the
**PVIF**table.

- Go to
**B15**and enter the following formula.

`=PV(C11,C12,0,-1)`

- Enter the
**Initial Rate**in**C15**. - Select
**D5**and enter the following formula to create the third column in the table. Drag the Fill Handle to column 16.

`=C15+$C$6`

- Enter the
**Initial Period**in**B16**. - Add a new row by using the following formula in
**B17**.

`=B16+$C$8`

- Drag down the Fill Handle to see the result in the rest of the cells.

- Select the whole table (
**B15:L45**). - Go to
**Data**>>**What-If Analysis**>>**Data Table**.

- In the Data Table, enter
**$C$11**as the**Row input cell**and**$C$12**as the**Column input cell**.

- Click
**OK**and the**PVIF**table will be created.

### 2. Make an FVIF Table to Calculate the Time Value of Money in Excel

The **FVIF **table contains future value interest factors.

- Copy the PVIF worksheet to a new worksheet.

- Select
**B15**and enter the formula below.

`=FV(C11,C12,0,-1)`

- Press
**Enter**and you will have your**FVIF**table.

### 3. Calculating the Time Value of Money with a PVIFA Table

To calculate the present worth of future value as annuities.

- Add a new row:
**Type**to the**PVIFA**table. - Select
**C13**and go to**Data >> Data Validation >> Data Validation**.

- Select
**List**in**Allow**. - Then enter “
**Regular, Due**” in**Source**.

Two options will be added in **C13**.

- Enter the following formula in
**B16**and the**PVIFA**table will be created.

`=IF(C13="Due",PV(C11,C12,-1,0,1),PV(C11,C12,-1,0,0))`

### 4. Create an FVIFA Table to Calculate the Time Value of Money in Excel

To determine the future worth of the present value of money.

- Copy the
**PVIFA**table into a new sheet and change the formula of**B16**to:

`=IF(C13="Due",FV(C11,C12,-1,0,1),FV(C11,C12,-1,0,0))`

**Download Practice Workbook**

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