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Future Value Formula:
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Future Value (FV) calculation projects the value of an investment at a specific future date, accounting for compound growth. It helps investors understand how their money can grow over time with consistent returns.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates how an initial investment grows over time when interest is compounded, showing the power of exponential growth in investments.
Details: Future Value calculations are essential for retirement planning, investment analysis, and financial goal setting. They help investors make informed decisions about savings and investment strategies.
Tips: Enter present value in USD, interest rate as a decimal (e.g., 0.05 for 5%), and number of compounding periods. All values must be positive numbers.
Q1: What's the difference between simple and compound interest?
A: Simple interest calculates returns only on the principal, while compound interest calculates returns on both principal and accumulated interest, leading to exponential growth.
Q2: How often should interest be compounded?
A: More frequent compounding (monthly vs. annually) results in higher returns. The calculator assumes compounding at the end of each period.
Q3: Can this calculator handle regular contributions?
A: This version calculates future value for a single lump sum investment. For regular contributions, an annuity future value formula would be needed.
Q4: What's a realistic interest rate for long-term investments?
A: Historical stock market returns average 7-10% annually, while bonds typically yield 2-5%. Conservative estimates are recommended for planning.
Q5: How does inflation affect future value?
A: Future value shows nominal returns. For real purchasing power, subtract expected inflation from the interest rate to calculate real returns.