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Future Value Formula:
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Future Value (FV) is the value of a current asset at a specified date in the future based on an assumed rate of growth over time. It helps investors understand how much their investments will be worth in the future.
The calculator uses the Future Value formula:
Where:
Explanation: The formula calculates how much an investment made today will grow to in the future, considering compound interest over the specified time period.
Details: Future value calculations are essential for financial planning, retirement planning, investment analysis, and comparing different investment opportunities. They help individuals and businesses make informed financial decisions.
Tips: Enter the principal amount in dollars, annual interest rate as a percentage, and time period in years. All values must be positive numbers.
Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest, leading to exponential growth.
Q2: How often is interest compounded in this calculator?
A: This calculator assumes annual compounding. For different compounding periods, the formula would need to be adjusted.
Q3: Can I use this for monthly investments?
A: This calculator is designed for single lump-sum investments. For regular contributions, you would need a different formula that accounts for multiple payments.
Q4: What factors affect future value the most?
A: The interest rate and time period have the most significant impact on future value due to the power of compounding over time.
Q5: Is this calculator suitable for inflation-adjusted returns?
A: This calculator provides nominal returns. For real returns (inflation-adjusted), you would need to subtract the inflation rate from the interest rate.