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Future Value Formula:
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The Future Value (FV) formula calculates the value of a current asset at a specified date in the future based on an assumed rate of growth. It is a fundamental concept in finance for investment planning and analysis.
The calculator uses the Future Value formula:
Where:
Explanation: The formula accounts for compound growth over multiple periods, where the growth in each period is applied to the accumulated value from previous periods.
Details: Future Value calculation is essential for investment planning, retirement savings analysis, loan amortization, and understanding the time value of money in financial decision making.
Tips: Enter present value in dollars, growth rate as a decimal (e.g., 0.05 for 5%), and number of periods. All values must be valid (PV > 0, r ≥ 0, n ≥ 1).
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 the principal plus accumulated interest from previous periods.
Q2: How does the growth rate affect future value?
A: Higher growth rates result in exponentially higher future values due to the compounding effect over time.
Q3: Can this formula be used for negative growth rates?
A: Yes, the formula works for negative growth rates (r < 0), which would represent depreciation or value decline over time.
Q4: What is the time period unit in this calculation?
A: The time period unit must be consistent - if r is an annual rate, n should be in years; if monthly, n should be in months.
Q5: How accurate is this future value prediction?
A: The calculation provides a mathematical projection based on constant growth rate assumptions. Actual results may vary due to market fluctuations and changing economic conditions.