1. What is Future Value?

Future Value (FV) is the value of a current asset at a future date based on an assumed rate of growth. It's a fundamental concept in finance that helps investors understand how much an investment made today will grow over time.

2. How Does the Calculator Work?

The calculator uses the Future Value formula:

Where:

• \( FV \) — Future Value (USD)
• \( PV \) — Present Value (USD)
• \( r \) — Interest rate per period (decimal)
• \( n \) — Number of periods (unitless)

Explanation: The formula accounts for compound growth of an investment over time at a specified interest rate.

3. Importance of Future Value Calculation

Details: Future Value calculations are crucial for financial planning, investment analysis, retirement planning, and comparing different investment opportunities.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as a decimal (e.g., 5% = 0.05), and number of periods. All values must be valid (PV > 0, rate ≥ 0, periods ≥ 1).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest calculates growth only on the principal amount, while compound interest includes growth on both principal and accumulated interest.

Q2: How often should compounding occur?
A: The more frequent the compounding (monthly vs. annually), the greater the future value. This calculator assumes compounding occurs once per period.

Q3: What are typical uses of future value calculations?
A: Common uses include retirement planning, investment growth projections, loan repayment calculations, and savings goal planning.

Q4: How does inflation affect future value?
A: The nominal future value doesn't account for inflation. For real value, subtract expected inflation from the interest rate.

Q5: Can this calculator handle variable rates?
A: No, this assumes a constant rate. For variable rates, each period would need separate calculation.