1. What is Future Value?

Future Value (FV) is the value of a current asset at a future date based on an assumed rate of growth over time. It's a fundamental concept in finance that helps in investment planning and decision making.

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 (as decimal)
• \( t \) — Number of time periods (years)

Explanation: The formula accounts for compound interest, where interest earned each period is added to the principal for the next period's interest calculation.

3. Importance of Future Value Calculation

Details: Calculating future value helps investors understand how much an investment made today will grow to in the future, enabling better financial planning and goal setting.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as decimal (e.g., 5% = 0.05), and time in years. All values must be positive numbers.

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 does compounding frequency affect future value?
A: More frequent compounding (e.g., monthly vs. annually) results in higher future values due to interest being calculated on interest more often.

Q3: Can this formula be used for inflation calculations?
A: Yes, by using the inflation rate as the interest rate, you can calculate how much future money is needed to equal today's purchasing power.

Q4: What if my investment has additional contributions?
A: This formula is for single lump-sum investments. For regular contributions, you would need the future value of annuity formula.

Q5: How accurate are future value calculations?
A: They provide mathematical projections but don't account for changes in interest rates, taxes, or other real-world variables.