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Future Value Formula:
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The Future Value formula for monthly payments calculates the total value of a series of regular payments (annuity) at a future date, considering compound interest. This is essential for retirement planning, savings goals, and investment analysis.
The calculator uses the future value of annuity formula:
Where:
Explanation: The formula accounts for compound interest on each monthly payment, where earlier payments accumulate more interest over time.
Details: Understanding future value helps individuals and businesses make informed financial decisions about savings, investments, and retirement planning by projecting the growth of regular contributions over time.
Tips: Enter monthly payment amount in dollars, monthly interest rate as a percentage (e.g., 0.5 for 0.5%), and number of periods in months. All values must be positive numbers.
Q1: What's the difference between future value and present value?
A: Future value calculates what money will be worth in the future, while present value determines what future money is worth today.
Q2: How does compounding frequency affect future value?
A: More frequent compounding (monthly vs. annually) results in higher future values due to interest being calculated more often.
Q3: Can this formula be used for irregular payments?
A: No, this formula assumes regular, equal payments. For irregular payments, each payment must be calculated separately.
Q4: What if the interest rate is zero?
A: When interest rate is zero, future value simply equals the total of all payments (PMT × n).
Q5: How accurate is this calculation for real-world scenarios?
A: This provides a mathematical projection. Actual results may vary due to changing interest rates, fees, taxes, and market conditions.