1. What is Future Value Calculation?

The Future Value (FV) calculation determines how much an investment made today (present value) will grow to at a future date based on a specified interest rate. It's a fundamental concept in finance for evaluating investment growth potential.

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 form)
• \( t \) — Number of time periods (typically 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

Details: Understanding future value helps in financial planning, comparing investment options, and setting realistic savings goals. It shows the power of compounding over time.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as a decimal (e.g., 5% = 0.05), 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 calculates on principal only, while compound interest calculates on principal plus accumulated interest, leading to exponential growth.

Q2: How does compounding frequency affect results?
A: More frequent compounding (monthly vs. annually) yields higher returns. This calculator assumes annual compounding.

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

Q4: Can this be used for debt calculations?
A: Yes, the same formula applies to debt growth, where the interest rate represents the borrowing cost.

Q5: How accurate are these projections?
A: They're mathematical projections assuming constant rates. Actual returns may vary due to market fluctuations.