TVM02 - Future Value of a Single Sum - Semiannual Period

This is a future value of a single sum problem with interest compounded semiannually.

Assume that GE deposits $1,500,000 into the Ohio River Bank at the beginning of 2015 as a commitment toward building a new manufacturing plant to be completed December 31st, 2019. How much will the company have on deposit at the end of five years if interest is 8.5% compounded semi-annually?

First, plug in the known values into the appropriate cells:

The present value – PV – is $1,500,000

The interest rate – Rate – is 8.5% divided by 2 or 4.25%

The number of periods – NPER – is 10 or 2 x 5

The unknown – future value – FV is determined by

Going to the formulas tab, look for the FV function.

The function wizard pops up

Select PV,

Select Rate,

Select NPER

Hit OK

The future value is $2,274,322

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