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Future Value Formula:
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The Future Value formula calculates how much a current investment will be worth in the future, assuming compound interest. It's essential for financial planning and understanding the growth potential of savings over time.
The calculator uses the Future Value formula:
Where:
Explanation: The formula calculates the compounded growth of your principal investment over a specified period at a given interest rate.
Details: Understanding future value helps in making informed investment decisions, retirement planning, and setting realistic financial goals. It demonstrates the power of compound interest over time.
Tips: Enter the principal amount in dollars, interest rate as a decimal (e.g., 0.05 for 5%), 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 the principal plus accumulated interest, leading to exponential growth.
Q2: How often is interest compounded in this calculator?
A: This calculator assumes annual compounding, meaning interest is calculated and added to the principal once per year.
Q3: Can I use this for monthly compounding?
A: For monthly compounding, you would need to adjust the formula to account for more frequent compounding periods.
Q4: What's a typical interest rate for savings accounts?
A: Interest rates vary widely but typically range from 0.01% to 2% for traditional savings accounts, with high-yield accounts offering higher rates.
Q5: How accurate are these calculations for real-world scenarios?
A: While the formula provides a mathematical projection, actual returns may vary due to changing interest rates, fees, and other factors.