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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. It is a fundamental concept in finance used to estimate how much an investment made today will be worth in the future.
The calculator uses the Future Value formula:
Where:
Explanation: This formula calculates compound interest, where interest earned in each period is added to the principal for the next period's interest calculation.
Details: Future Value calculations are essential for financial planning, retirement savings, investment analysis, and comparing different investment opportunities. It helps individuals and businesses make informed decisions about long-term financial goals.
Tips: Enter present value in dollars, interest rate as a percentage (e.g., 5 for 5%), and number of periods. All values must be positive numbers. The calculator assumes annual compounding unless specified otherwise.
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 from previous periods.
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 on accumulated interest more often.
Q3: Can this calculator be used for different compounding periods?
A: This calculator assumes the interest rate matches the period. For different compounding frequencies, adjust the rate and periods accordingly.
Q4: What is a typical interest rate for savings?
A: Savings account rates vary but typically range from 0.5% to 2% for traditional banks, while high-yield savings accounts may offer 3-5%.
Q5: How accurate are future value calculations?
A: Future Value calculations provide mathematical estimates but actual returns may vary due to changing interest rates, fees, and market conditions.