Formula and Use
The lump sum number of periods formula is used to work out the amount of time (n) it takes to grow a lump sum from its present value (PV), to a future value (FV) allowing for a given discount rate (i%).
Lump Sum Number of Periods Formula Excel Function
The Excel NPER function can be used instead of the lump sum number of periods formula, and has the syntax shown below.
*The pmt and type arguments are not used when calculating the number of periods for a lump sum.
If a lump sum of 1,000 is received at the start of period 1, and the discount rate is 10%, then the number of periods to increase the value of the lump sum to 2,000 is given by the lump sum number of periods formula as follows:
n = LN(FV / PV) / LN(1 + i) n = LN(2,000 / 1,000 / LN(1 + 10%) n = 7.27 periods
The same answer can be obtained using the number of periods formula in Excel as follows:
n = NPER(i,,PV,-FV) n = NPER(10%,,1000,-2000) n = 7.27 periods
*don’t forget the minus sign on FV
The lump sum number of periods formula is one of many used in time value of money calculations, discover another at the links below.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.