Home
Back
Future Value Formula:
| From: | To: |
The Future Value formula calculates how much a current savings amount will grow to in the future when interest is compounded at regular intervals. It's a fundamental concept in personal finance and investment planning.
The calculator uses the compound interest formula:
Where:
Explanation: The formula accounts for compound interest, where interest is earned on both the principal and accumulated interest over time.
Details: Understanding future value helps in financial planning, retirement savings calculations, investment decisions, and setting realistic financial goals.
Tips: Enter 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.
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 principal and accumulated interest.
Q2: How does compounding frequency affect future value?
A: More frequent compounding (higher n) results in higher future value due to interest being calculated and added more often.
Q3: What is a typical compounding frequency for savings accounts?
A: Most savings accounts compound interest daily, monthly, or quarterly (n = 365, 12, or 4 respectively).
Q4: Can this formula be used for investments other than savings accounts?
A: Yes, the formula applies to any investment where interest is compounded at regular intervals.
Q5: How accurate is this calculation for real-world scenarios?
A: The formula provides a mathematical estimate. Actual results may vary slightly due to rounding practices and exact timing of interest calculations.