1. What is Future Value Calculation?

The Future Value (FV) calculation determines how much an investment made today (present value) will grow to at a future date based on a specified interest rate and time period. It's a fundamental concept in finance for evaluating investment opportunities.

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 growth, where interest earned each period is added to the principal and earns interest in subsequent periods.

3. Importance of Future Value

Details: Future Value calculations are essential for financial planning, investment analysis, retirement planning, and comparing different investment options.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as a 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 the calculation?
A: More frequent compounding (monthly vs. annually) results in higher future values. This calculator assumes annual compounding.

Q3: What's a typical interest rate for investments?
A: Rates vary widely: savings accounts (~0.5-2%), bonds (2-5%), stocks (historical average ~7-10% annually).

Q4: Can this be used for inflation calculations?
A: Yes, you can use inflation rate as the interest rate to see how purchasing power decreases over time.

Q5: How accurate are these projections?
A: They're mathematically precise but assume a constant rate of return, which rarely happens in real markets.