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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. The FV calculation allows investors to predict, with varying degrees of accuracy, the amount of profit that can be generated by different investments. FV calculation is based on the assumption of a stable growth rate.

Why is Future Value important?

The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth in the future. Knowing the future value enables investors to make sound investment decisions based on their anticipated needs

2 Ways of calculating Future Value

The FV calculation can be done in two ways depending on the type of interest being earned.

  1. Simple Interest
  2. Compound Interest

Formula for calculating Future Value

Simple Interest -

 

If an investment earns simple interest, then the Future Value (FV) formula is -

FV (Simple Interest)

where :

  • I = Investment Amount
  • R = Interest Rate
  • T = Number of years

Compound Interest -

 

The formula for the Future Value (FV) of an investment earning compounding interest is -

FV (Compound Interest)

where :

  • I = Investment Amount
  • R = Interest Rate
  • T = Number of years

Benefits of Future Value Calculator

There are various benefits of Future Value Calculator -

  • This calculator can tell you the exact value of amount invested for the future.
  • By knowing the future value of the amount invested, one can add more other investment option so that one can have a huge corpus in the end.

Why one needs Future Value Calculator?

The whole and sole purpose of using future value calculator is that we come to know that how much amount will be accumulated in future if we invest certain amount in present for a particular period of time.

Based on your future value calculation. You can take following action and change your investment strategy. The action are as follows -

  • Increase the deposit amount.
  • Increase the number of times you deposit your investment.
  • Invest in such investment option where you can earn more interest on your investment.