1. What is the Future Value Formula?

The Future Value (FV) formula calculates how much an investment will grow over time, accounting for compound interest and periodic contributions. It's essential for financial planning and investment analysis.

2. How Does the Calculator Work?

The calculator uses the Future Value formula:

Where:

• \( PV \) — Present value or initial investment (USD)
• \( r \) — Annual interest rate (in decimal form)
• \( t \) — Time period in years
• \( PMT \) — Periodic payment or contribution (USD)

Explanation: The formula has two parts - the first calculates growth of the initial investment, the second calculates growth of periodic contributions.

3. Importance of Future Value Calculation

Details: Understanding future value helps with retirement planning, investment decisions, and comparing different savings options. It shows the power of compound interest over time.

4. Using the Calculator

Tips: Enter present value in USD, annual rate as decimal (5% = 0.05), time in years, and periodic payment in USD. All values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between PV and PMT?
A: PV is your initial lump sum investment, while PMT represents regular contributions you make to the investment.

Q2: How often are contributions compounded?
A: This calculator assumes annual compounding. For more frequent compounding, adjust the rate and time accordingly.

Q3: What if my rate changes over time?
A: This calculator assumes a constant rate. For variable rates, you'd need to calculate each period separately.

Q4: How accurate is this calculation?
A: It's mathematically precise for the given inputs, but actual investment returns may vary due to market fluctuations.

Q5: Can I use this for monthly contributions?
A: Yes, but you'd need to convert the annual rate to a monthly rate and time to months for accurate results.