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Future Value Formula:
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Future Value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The FV calculation allows investors to predict how much an investment made today will be worth in the future.
The calculator uses the Future Value formula:
Where:
Explanation: The formula calculates compound interest, where interest is earned on both the initial principal and the accumulated interest from previous periods.
Details: Understanding future value helps in financial planning, investment decisions, and comparing different investment options. It's fundamental in retirement planning, education savings, and any long-term financial goal.
Tips: Enter the principal amount in USD, annual interest rate as a decimal (e.g., 0.05 for 5%), and number of years. All values must be valid (principal > 0, rate ≥ 0, years ≥ 0).
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. This calculator assumes annual compounding.
Q3: What are typical uses for future value calculations?
A: Common uses include retirement planning, investment growth projections, loan repayment calculations, and savings goals.
Q4: How accurate are future value projections?
A: Projections assume a constant rate of return, which may not reflect actual market conditions. They're estimates, not guarantees.
Q5: Can this calculator handle negative interest rates?
A: Yes, though negative rates would result in a future value lower than the principal amount.