Home
Back
Future Value Formula:
| From: | To: |
The Future Value formula calculates how much a current investment will be worth in the future, accounting for compound interest. It's essential for financial planning and understanding how savings grow over time.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates how money grows over time with compound interest, where interest is earned on both the initial principal and accumulated interest.
Details: Understanding future value helps with retirement planning, savings goals, and investment decisions. It demonstrates the power of compound interest over time.
Tips: Enter the principal amount in dollars, annual interest rate as a decimal (e.g., 0.05 for 5%), number of compounding periods per year, and time in years. 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 both the principal and accumulated interest.
Q2: How does compounding frequency affect future value?
A: More frequent compounding (higher n value) results in higher future value due to interest being calculated and added more often.
Q3: Should I convert percentage rates to decimals?
A: Yes, enter 5% as 0.05 in the calculator. The calculator expects the rate in decimal format.
Q4: Can this calculator handle monthly contributions?
A: No, this calculator only handles a single principal amount. For regular contributions, a different formula is needed.
Q5: Is this calculator accurate for all types of investments?
A: This calculator works best for fixed-rate savings accounts. Variable rate investments or those with fees may require different calculations.