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. 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:

• \( PV \) — Present Value (initial investment)
• \( r \) — Interest rate (as decimal)
• \( t \) — Time period in years

Explanation: The formula accounts for compound interest over time, showing how money grows when invested at a certain rate.

3. Importance of Future Value Calculation

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

4. Using the Calculator

Tips: Enter present value in USD, interest rate as decimal (e.g., 0.05 for 5%), 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 (monthly vs. annually) results in higher future values due to interest being calculated on interest more often.

Q3: Can I use this for monthly investments?
A: This calculator assumes a single lump sum investment. For regular contributions, you'd need an annuity future value calculator.

Q4: How accurate are future value calculations?
A: They're mathematically precise for given inputs, but actual investment returns may vary due to changing rates and market conditions.

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