1. What is the Future Value Calculation?

The future value calculation determines how much a current savings amount will grow to in the future, considering compound interest and regular contributions. It's essential for financial planning and retirement savings projections.

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
• \( r \) — Interest rate per period (as decimal)
• \( t \) — Number of time periods (years)
• \( PMT \) — Regular payment amount

Explanation: The first part calculates compound growth of the initial investment, while the second part calculates the future value of a series of regular payments.

3. Importance of Future Value Calculation

Details: Understanding future value helps in setting realistic savings goals, comparing investment options, and planning for major expenses like education or retirement.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as decimal (5% = 0.05), time in years, and regular payment in USD. All values must be non-negative.

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.

Q2: How often is interest compounded in this calculator?
A: The formula assumes annual compounding. For different compounding periods, adjust the rate and time accordingly.

Q3: When are payments assumed to be made?
A: The formula assumes end-of-period payments. For beginning-of-period payments, multiply the PMT part by (1+r).

Q4: What if my interest rate is 0%?
A: The calculator handles this special case by simplifying the formula to FV = PV + PMT × t.

Q5: Can I use this for monthly contributions?
A: Yes, but convert annual rate to monthly (divide by 12) and time to months (multiply by 12).