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The Excel PV function calculates the Present Value of an investment, based on a series of future payments.

The syntax of the function is:

PV( rate, nper, [pmt], [fv], [type] )

Where the arguments are as follows:

rate | - | The interest rate, per period. |

nper | - | The number of periods for the lifetime of the annuity or investment. |

[pmt] | - | An optional argument that specifies the payment per period. If the [pmt] argument is omitted, the [fv] argumentmust be supplied. |

[fv] | - | An optional argument that specifies the future value of the annuity, at the end of nper payments. If the [fv] argument is omitted, it takes on the default value 0. |

[type] | - | An optional argument that defines whether the payment is made at the start or the end of the period. The [type] argument can have the value 0 or 1, meaning: 0 - the payment is made at the end of the period; |

Cash Flow Convention:

Note that, in line with the general cash flow convention, outgoing payments are represented by negative numbers and incoming payments are represented by positive numbers. This is seen in the examples below.In the following spreadsheet, the Excel Pv function is used to calculate the present value of an annuity that pays $1,000 per month for a period of 5 years. The interest is 5% per year and each payment is made at the end of the month.

Formulas: | Results: |

Note that, in this example:

- The payments are made monthly, so we have had to convert the annual interest rate of 5% into the monthly rate (=5%/12), and the 5-year period needs to be input as a number of months (=60);
- As the forecast value is zero, and the payment is to be made at the end of the month, the [fv] and [type] arguments can be omitted from the above function;
- As the initial investment is paid
__out__, the calculated present value is a__negative__cash amount.

In the example below, the Excel Pv function is used to calculate the present value of an annuity that pays $2,000 per quarter for a period of 4 years. The interest is 10% per year and each payment is made at the start of the quarter.

Formulas: | Results: |

Note that, in this example:

- The payments are made quarterly, so we have had to convert the annual interest rate of 10% into the monthly rate (=10%/4), and the 4-year period needs to be input as a number of quarters (=16)
- Again, as the initial investment is paid
__out__, the calculated present value is__negative__.

Further details and examples of the Excel Pv function are provided on the Microsoft Office website.

If you get an error from the Excel Pv Function, this is most likely to be the #VALUE error:

Common Errors

#VALUE! | - | Occurs if any of the supplied arguments are non-numeric. |