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EasyFreeFV

FV: saving for a child's college fund

Rahma puts Rp1,500,000 into a money market fund at the end of every month for her child's college fees. She assumes a 5% annual return and plans to save for 5 years.

Task

In B5, calculate the savings value at the end of year 5 with FV. Convert the annual return (B1) to a monthly rate and the number of years (B2) to months inside the formula. Show the result as a positive number.

Cells to fillB5

Required functionsFV

Expected result

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Hint 1
FV(rate, nper, pmt) calculates the future value of equal regular deposits.
Hint 2
The deposits are monthly, so the rate is B1/12 and the number of periods is B2*12.
Hint 3
Deposits are money leaving your wallet, so give them a minus sign: =FV(B1/12, B2*12, -…).

Reveal them one at a time. The last hint nearly gives the answer away.

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Answer

B5

=FV(B1/12,B2*12,-B3)

Explanation

=FV(B1/12,B2*12,-B3) gives about Rp102 million, while the total deposited is only Rp90 million (60 × 1.5 million). The difference is compound growth. If the deposits are made at the start of each month, set the 5th argument (type) to 1 and the result is slightly higher. Remember that fund returns are not guaranteed, so this is a simulation.

Starting worksheet: Sheet1
Row	A	B
1	Annual return	5%
2	Years of saving	5
3	Monthly deposit	1,500,000
4
5	Final savings value
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Fill in the requested cell, then press Check answer.

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