Future Value Calculator

How to Calculate Future Value

The Future Value (FV) calculator is an essential tool in financial planning that helps investors estimate the growth of their investments over time. This calculator takes into account the present value of an investment, the expected rate of return, and the time period to determine the future value of the investment.

Future Value Formula

The formula for calculating the Future Value is:

$$FV = PV \times (1 + r)^t$$

Where:

• FV = Future Value
• PV = Present Value (initial investment)
• r = Annual Rate of Return (as a decimal)
• t = Time Period (in years)

Calculation Steps

1. Identify the Present Value (PV) of the investment.
2. Determine the Annual Rate of Return (r) and convert it to a decimal (divide by 100).
3. Specify the Time Period (t) in years.
4. Add 1 to the decimal form of the rate (1 + r).
5. Raise the result from step 4 to the power of the time period (t).
6. Multiply the result from step 5 by the Present Value (PV).
7. The result is the Future Value (FV) of the investment.

Example Calculation

Let's calculate the Future Value of an investment with the following parameters:

• Present Value (PV) = $10,000
• Annual Rate of Return (r) = 7%
• Time Period (t) = 5 years

Step 1: Convert the rate to a decimal

r = 7% ÷ 100 = 0.07

Step 2: Apply the formula

$$FV = 10,000 \times (1 + 0.07)^5$$

$$FV = 10,000 \times (1.07)^5$$

$$FV = 10,000 \times 1.4026$$

$$FV = 14,026$$

Final Result:

• Future Value (FV): $14,026

Visual Representation

This diagram illustrates the growth of a $10,000 investment over 5 years with a 7% annual rate of return. The line graph shows how the investment value increases each year, reaching $14,026 by the end of the 5-year period. This visual representation helps to understand the concept of compound growth and how investments can grow over time.