1. What is Future Value Calculation?

Future Value (FV) calculation determines how much an investment made today will grow to at a specific interest rate over a certain time period. It's a fundamental concept in finance for evaluating investment opportunities and financial planning.

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 is earned on both the initial principal and accumulated interest from previous periods.

3. Importance of Future Value Calculation

Details: Understanding future value helps in making informed investment decisions, retirement planning, loan analysis, and comparing different investment options.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as decimal (e.g., 0.05 for 5%), 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 does compounding frequency affect results?
A: More frequent compounding (monthly vs. annually) yields higher returns. This calculator assumes annual compounding.

Q3: Can I use this for negative interest rates?
A: Yes, the formula works for negative rates (though results will show depreciation rather than growth).

Q4: How accurate is this for long-term projections?
A: It provides mathematical accuracy but doesn't account for inflation, taxes, or changing interest rates.

Q5: What's the Rule of 72?
A: A quick way to estimate doubling time: 72 divided by the interest rate gives approximate years to double your investment.