1. What is the Future Value Formula?

The Future Value (FV) formula calculates the future amount of money based on present value, interest rate, and time periods. It's a fundamental concept in finance for determining how much an investment will grow over time.

2. How Does the Calculator Work?

The calculator uses the Future Value formula:

Where:

• \( FV \) — Future Value (currency)
• \( PV \) — Present Value (currency)
• \( r \) — Interest Rate (rate)
• \( n \) — Number of Periods (periods)

Explanation: The formula calculates compound interest, where money grows exponentially over time due to earning interest on both the principal and accumulated interest.

3. Importance of Future Value Calculation

Details: Future value calculations are essential for financial planning, investment analysis, retirement planning, and comparing different investment opportunities.

4. Using the Calculator

Tips: Enter present value in currency units, interest rate as a decimal (e.g., 0.05 for 5%), and number of periods. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest calculates interest only on the principal, while compound interest calculates interest on both principal and accumulated interest.

Q2: How does compounding frequency affect future value?
A: More frequent compounding (monthly vs. annually) results in higher future values due to more frequent interest calculations.

Q3: Can this calculator handle different compounding periods?
A: This version assumes compounding per period entered. For different compounding frequencies, adjust the rate and periods accordingly.

Q4: What are typical applications of future value calculations?
A: Retirement planning, education savings, investment growth projections, and loan amortization schedules.

Q5: How does inflation affect future value?
A: Inflation reduces the purchasing power of future money. For real returns, subtract inflation rate from the nominal interest rate.