TVM05 - Present Value of a Single Sum – Unknown Number of Periods
This is a problem in which the present value, future value and interest rate is known, but with an unknown number of compounding periods.
Assume you want to accumulate $80,000 in a fund to build a new house. At the beginning of the current year, you deposit $50,000 in a fund that earns 10.5% compounded annually. How many years will it take to accumulate $80,000 in the fund?
First, plug in the known values into the appropriate cells:
The future value – FV – is $80,000
The interest rate – Rate – is 10.5%
The present value – PV – is ($50,000)
The unknown – number of periods – NPER is determined by
Going to the formulas tab, look for the NPER function.
The function wizard pops up
The number of periods is 4.71 or just less than 5 years