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Future Value Formula:
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Future Value (FV) of a payment calculates how much a current payment will be worth in the future when invested at a specific interest rate over a certain period. It helps in financial planning and investment decision-making.
The calculator uses the Future Value formula:
Where:
Explanation: The formula calculates the compounded growth of a single payment over time, showing how interest accumulates on both the principal and previously earned interest.
Details: Understanding future value is essential for investment planning, retirement savings, loan analysis, and comparing different financial opportunities. It helps individuals and businesses make informed decisions about their financial future.
Tips: Enter the payment amount in your preferred currency, the interest rate as a decimal (e.g., 0.05 for 5%), and the number of periods. All values must be positive numbers.
Q1: What's the difference between FV and PV?
A: Future Value (FV) calculates what a current amount will be worth in the future, while Present Value (PV) calculates what a future amount is worth today.
Q2: How does compounding frequency affect FV?
A: More frequent compounding (monthly vs. annually) results in higher future values due to interest being calculated on accumulated interest more often.
Q3: Can I use this for multiple payments?
A: This calculator is for single payments. For multiple payments (annuities), you would need a different formula that accounts for regular contributions.
Q4: What if the interest rate is 0%?
A: With 0% interest, the future value equals the present value since there's no growth over time.
Q5: How accurate is this calculation for real investments?
A: This provides a theoretical calculation assuming constant interest rates. Real investments may have variable rates, fees, and other factors that affect actual returns.