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Future Value Formula:
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The Vanguard Home Investment Calculator helps you estimate the future value of regular savings investments using the future value of an ordinary annuity formula. It's designed for long-term savings planning, particularly for home investment goals.
The calculator uses the Future Value of Ordinary Annuity formula:
Where:
Explanation: This formula calculates how much your regular investments will grow over time with compound interest, assuming payments are made at the end of each period.
Details: Understanding the future value of your investments is crucial for financial planning, retirement savings, and achieving major financial goals like home ownership. It helps you determine how much you need to save regularly to reach your target amount.
Tips: Enter the periodic payment amount in USD, the interest rate as a decimal (e.g., 0.05 for 5%), and the number of periods. All values must be positive numbers.
Q1: What is an ordinary annuity?
A: An ordinary annuity involves equal payments made at the end of each period, which is the most common scenario for regular savings plans.
Q2: How do I convert annual percentage rate to decimal?
A: Divide the annual percentage rate by 100. For example, 5% becomes 0.05 as a decimal.
Q3: What if my payments are monthly but rate is annual?
A: Convert the annual rate to monthly by dividing by 12, and multiply years by 12 for monthly periods.
Q4: Does this account for inflation?
A: No, this calculation shows nominal future value. For real value, use an inflation-adjusted interest rate.
Q5: Can I use this for different compounding frequencies?
A: Yes, ensure your interest rate and periods match the compounding frequency (monthly, quarterly, annually).