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 investors understand how much an investment made today will grow over time.

2. How Does the Calculator Work?

The calculator uses the Future Value formula:

Where:

• \( FV \) — Future Value
• \( PV \) — Present Value (initial investment)
• \( r \) — Interest rate per period (in decimal)
• \( t \) — Number of time periods (years)

Explanation: The formula accounts for compound interest, where interest earned each period is added to the principal and earns interest in subsequent periods.

3. Importance of Future Value Calculation

Details: Understanding future value helps in financial planning, 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., 5% = 0.05), and time 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 calculator?
A: This calculator assumes annual compounding. For different compounding periods, the formula needs adjustment.

Q3: What's a typical rate of return for investments?
A: Historical stock market returns average about 7-10% annually, but this varies by investment type and time period.

Q4: Can I calculate present value from future value?
A: Yes, by rearranging the formula: \( PV = FV / (1 + r)^t \). This is called discounting.

Q5: How does inflation affect future value?
A: Inflation reduces purchasing power. For real (inflation-adjusted) returns, subtract inflation rate from the interest rate.