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 investors understand how much an investment made today will grow to in the future.

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 (as decimal)
• \( t \) — Number of time periods (years)

Explanation: The formula accounts for compound interest, where interest is earned on both the initial principal and the accumulated interest from previous periods.

3. Importance of Future Value Calculation

Details: Calculating future value helps in financial planning, investment decisions, retirement planning, and comparing different investment opportunities.

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 positive numbers.

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 often is interest compounded in this calculator?
A: This calculator assumes annual compounding. For more frequent compounding, you would need to adjust the rate and periods accordingly.

Q3: What's a typical interest rate for investments?
A: It varies widely - savings accounts might offer 0.5-2%, bonds 2-5%, stocks historically average 7-10% annually.

Q4: Can I use this for monthly calculations?
A: Yes, but convert time to years (e.g., 6 months = 0.5 years) and ensure the rate is for the same period.

Q5: How does inflation affect future value?
A: The nominal future value doesn't account for inflation. For real value, subtract expected inflation from the interest rate.