1. What is Future Value?

The Future Value (FV) of an asset is the value of a current asset at a specified date in the future based on an assumed rate of growth. 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 of the investment
• \( PV \) — Present Value or initial investment amount
• \( r \) — Interest rate (in decimal form)
• \( t \) — Time period in years

Explanation: The formula accounts for compound interest over time, showing how money grows when earnings are reinvested.

3. Importance of Future Value Calculation

Details: Calculating future value helps investors understand how much their current investments will be worth in the future, allowing for better financial planning and goal setting.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as a decimal (e.g., 0.05 for 5%), and time period 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 and accumulated interest.

Q2: How often is interest compounded in this calculation?
A: This formula assumes annual compounding. For different compounding periods, the formula needs adjustment.

Q3: Can I use this for monthly investments?
A: This calculator is for single lump-sum investments. For regular contributions, you'd need the future value of annuity formula.

Q4: What if my interest rate changes over time?
A: This calculator assumes a constant rate. For variable rates, you'd need to calculate each period separately.

Q5: How does inflation affect future value?
A: This gives nominal future value. For real (inflation-adjusted) value, you'd need to subtract expected inflation from the interest rate.