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 in investment planning and decision making.

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 (in decimal form)
• \( t \) — Time period in years

Explanation: The formula accounts for compound interest, where interest earned each period is added to the principal for the next period's interest calculation.

3. Importance of Future Value Calculation

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.

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 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 does compounding frequency affect future value?
A: More frequent compounding (e.g., monthly vs. annually) results in higher future values due to interest being calculated on interest more often.

Q3: What are typical applications of future value calculations?
A: Retirement planning, education savings, investment comparison, and loan repayment analysis.

Q4: Can this calculator handle irregular contributions?
A: No, this calculator assumes a single lump sum investment. For regular contributions, you'd need an annuity future value calculator.

Q5: How accurate are future value projections?
A: Projections are only as accurate as the input assumptions. Actual returns may vary due to changing interest rates and other factors.