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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's a fundamental concept in finance that helps investors understand how much an investment made today will be worth in the future.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates how money grows over time when interest is compounded. Each period's interest earns additional interest in subsequent periods.
Details: Future value calculations are essential for retirement planning, investment analysis, loan amortization, and financial decision-making. They help individuals and businesses make informed choices about savings and investments.
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 is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.
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 calculator handle different compounding periods?
A: This calculator uses the basic formula. For different compounding frequencies, adjust the interest rate and periods accordingly.
Q4: What is a typical interest rate for investments?
A: Interest rates vary widely by investment type. Savings accounts may offer 1-3%, while stocks historically average 7-10% annually.
Q5: How accurate are future value calculations?
A: They provide mathematical projections but don't account for inflation, taxes, or market volatility which can affect actual returns.