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Future Value Formula:
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The Future Value formula calculates how much a current investment will be worth in the future, based on a specified interest rate and time period. It's a fundamental concept in finance for savings and investment planning.
The calculator uses the Future Value formula:
Where:
Explanation: The formula calculates the compounded growth of an investment over time, showing how interest earns additional interest.
Details: Understanding future value helps individuals and businesses make informed financial decisions, plan for retirement, set savings goals, and compare different investment options.
Tips: Enter present value in currency units, interest rate as a decimal (e.g., 0.05 for 5%), and number of years. All values must be valid (PV > 0, r ≥ 0, n ≥ 0).
Q1: What's the difference between simple and compound interest?
A: Simple interest calculates earnings only on the principal amount, while compound interest calculates earnings on both principal and accumulated interest.
Q2: How often should interest be compounded?
A: This calculator assumes annual compounding. For different compounding periods, the formula needs adjustment (divide rate and multiply periods accordingly).
Q3: Can this calculator handle negative interest rates?
A: While mathematically possible, negative rates would indicate depreciation rather than growth, which isn't typical for savings calculations.
Q4: What inflation considerations should be made?
A: The calculated future value is nominal. For real purchasing power, subtract expected inflation from the interest rate.
Q5: How accurate are future value projections?
A: Projections assume constant interest rates and no additional contributions/withdrawals. Actual results may vary due to market fluctuations.