1. What Is Future Value Calculation?

Future Value (FV) calculation determines how much a current investment will be worth in the future, accounting for compound interest. It helps in financial planning and investment decision-making.

2. How Does the Calculator Work?

The calculator uses the Future Value formula:

Where:

• \( FV \) — Future Value (dollars)
• \( PV \) — Present Value (dollars)
• \( r \) — Interest Rate (as decimal)
• \( n \) — Number of Periods

Explanation: The formula calculates the compounded growth of an investment over time, showing how money grows with interest earning interest.

3. Importance of Future Value Calculation

Details: Understanding future value helps in retirement planning, investment analysis, loan calculations, and making informed financial decisions about savings and investments.

4. Using the Calculator

Tips: Enter present value in dollars, interest rate as a percentage (e.g., 5 for 5%), and number of compounding periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both principal and accumulated interest.

Q2: How often should interest be compounded?
A: The compounding frequency affects the final amount. Common frequencies include annually, semi-annually, quarterly, or monthly.

Q3: Can this calculator handle different compounding periods?
A: This calculator assumes the interest rate matches the period length. For different compounding frequencies, adjust the rate and periods accordingly.

Q4: What is the rule of 72?
A: The rule of 72 estimates how long it takes for an investment to double (72 divided by the interest rate).

Q5: How does inflation affect future value?
A: Inflation reduces the purchasing power of money over time. Real return should consider both nominal return and inflation rate.