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 over time. It's a fundamental concept in finance that helps in investment planning and comparing different investment options.

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 (as decimal)
• \( t \) — Time period in years

Explanation: The formula accounts for compound interest over time, showing how money grows when invested at a certain rate.

3. Importance of Future Value Calculation

Details: Calculating future value helps in financial planning, retirement planning, investment decisions, and understanding the time value of money.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as decimal (e.g., 5% = 0.05), 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 does compounding frequency affect future value?
A: More frequent compounding (monthly vs. annually) results in higher future values due to interest being calculated on interest more often.

Q3: What are typical uses of future value calculations?
A: Common uses include retirement planning, investment growth projections, loan repayment calculations, and comparing investment options.

Q4: How does inflation affect future value?
A: Inflation reduces the purchasing power of money over time, so the "real" future value may be less than the nominal future value calculated.

Q5: Can this formula be used for negative interest rates?
A: Yes, the formula works with negative rates (r < 0), which would result in the future value being less than the present value.