1. What is Future Value?

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's a fundamental concept in finance that helps in investment planning and financial decision making.

2. How Does the Calculator Work?

The calculator uses the Future Value formula:

Where:

• \( FV \) — Future Value (USD)
• \( PV \) — Present Value (USD)
• \( r \) — Interest rate (decimal)
• \( t \) — Time period in years

Explanation: The formula calculates how much an investment made today will grow to in the future, accounting for compound interest over time.

3. Importance of Future Value Calculation

Details: Understanding future value helps in making informed investment decisions, retirement planning, and comparing different investment opportunities.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as a decimal (e.g., 0.05 for 5%), and time period in years. All values must be valid (PV > 0, rate ≥ 0, time > 0).

5. Frequently Asked Questions (FAQ)

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.

Q2: How often is interest compounded in this calculation?
A: This formula assumes annual compounding. For different compounding periods, the formula needs adjustment.

Q3: Can I use this for monthly calculations?
A: Yes, but you need to adjust the rate (divide annual rate by 12) and time (multiply years by 12).

Q4: What if my investment has additional contributions?
A: This formula calculates future value for a single lump sum. For regular contributions, you'd need the future value of an annuity formula.

Q5: How does inflation affect future value?
A: This calculation shows nominal future value. For real (inflation-adjusted) value, you'd need to subtract the inflation rate from the interest rate.