Home
Back
Future Value Formula:
| From: | To: |
The Future Value (FV) of money calculates how much a present amount (PV) will grow over time when invested at a given interest rate. It demonstrates the time value of money - the concept that money available now is worth more than the same amount in the future due to its potential earning capacity.
The calculator uses the Future Value formula:
Where:
Explanation: The formula accounts for compound interest, where each period's interest is added to the principal for the next period's interest calculation.
Details: Understanding future value helps with financial planning, investment decisions, retirement planning, and comparing different investment options.
Tips: Enter present value in dollars, interest rate as a percentage (e.g., 5 for 5%), and number of periods in years. All values must be positive numbers.
Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.
Q2: How does compounding frequency affect results?
A: More frequent compounding (monthly vs. annually) increases the future value. This calculator assumes compounding occurs once per period.
Q3: Can I use this for monthly investments?
A: This calculates a single lump sum investment. For regular contributions, you'd need the future value of an annuity formula.
Q4: Why is future value important for retirement planning?
A: It helps estimate how much your current savings will grow by retirement age, showing if you're on track to meet your goals.
Q5: How does inflation affect future value?
A: The nominal future value doesn't account for inflation. For real (inflation-adjusted) value, subtract expected inflation from the interest rate.