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Future Value Formula:
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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 financial decision making.
The calculator uses the Future Value formula:
Where:
Explanation: The formula accounts for compound growth of an investment over time at a constant interest rate.
Details: Calculating future value helps investors understand how much an investment made today will grow to in the future, enabling better financial planning and comparison of investment options.
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).
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 previously earned interest more often.
Q3: What's a typical interest rate for investments?
A: Rates vary widely: savings accounts (0.5-2%), bonds (2-5%), stocks (historically 7-10% annually over long periods).
Q4: Can this calculator handle negative interest rates?
A: The formula works mathematically with negative rates, but our calculator restricts rates to 0-1 (0-100%) as negative rates are rare in personal finance.
Q5: How accurate are future value calculations?
A: They're mathematically precise for the given inputs, but actual investment returns may vary due to changing rates, fees, taxes, and market volatility.