Calculating future value with compound interest

[emiliaw.]

I'm trying to do something very similar to the FV function, but using compound interest, so I have an initial monthly payment amount of $259, that increases by 4% anuually for 359 months. Is there an excel function for this or a formula I can use? Thanks!!

 

[sheetspread]

That is what the FV formula does. Or you could take 259 * 1.04 = period 1 interest and principal, then multiply that by 1.04 for the next period, etc. 1.04^360 is the total factor.

 

[emiliaw.]

I asked the question incorrectly...sorry- the amount of the payment increases by 4% every year (it's not an interest rate). Anything out there for something like that? Thanks!

 

[sheetspread]

So just multiply the payment by 1.04 each year, no?

 

[emiliaw.]

Yeah- but it's for like 30 years...I want an easy way to calculate. A co-worker has a whole spreadsheet of these to calculate and she has been doing these all by hand. I'm thinking there has to be a more efficient was of doing this.

 

[Jose_Chasez]

This is a future value of a growing annuity. The general equation is:

FV = P * [ ((1+r)^n - (1+g)^n) / (r-g) ]

where:
P = initial payment
r = interest rate
n = number of periods
g = growth rate

The notation is difficult to post in a forum like this. If it's difficult to follow, do a Google search for growing annuity formulae.

Hope this helps.

 

[emiliaw.]

I think that's a winner!! My college days of Finance are coming back . Thanks a ton!