1. What is Future Value?

Future Value (FV) is the value of a current asset at a future date based on an assumed rate of growth. It's a fundamental concept in finance that helps determine 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 (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 and earns interest in subsequent periods.

3. Importance of Future Value Calculation

Details: Understanding 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 a decimal (e.g., 5% = 0.05), 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 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 interest more often.

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

Q4: Can this calculator handle negative interest rates?
A: The formula works with negative rates, but our calculator restricts rates to 0-100% for typical use cases.

Q5: How accurate are future value calculations?
A: They're mathematically precise for given inputs, but actual investment returns may vary due to market fluctuations.