Cash Flow 1000
Interest Rate 0.5
No.of periods 12
What is the future value?
The future value is defined as the calculating the present value of an asset or money at a specified date or time in the future based on the assumed growth rate. The future value calculations allow the investor to predict the amount of profit that can be gained on the investment.
The Future value using simple annual interest:
To calculate the future value of the investment using simple interest is by using the following formula:
FV = I * [1+ (R*T)]
FV= Future value.
I= Initial investment.
R= Rate of interest.
T= Number of years.
The Future value using compounded annual interest:
The simple interest is calculated on the initial investment whereas in compound interest the interest gained by the end of the year is added to investment. The formula for calculating the future value using compound interest is:
FV = I * [1+ (R*T) T]
The time value of money:
The future value is the backbone of the finance. There won’t be any investment without future value and it is an important element in the time value of money.
The components included in the future value calculator:
- Number of the period: the numbers of years or months the amount invested.
- Starting amount: The amount at the starting of the investment.
- Interest rate: The interest rate on the amount invested.
- Periodic deposit: The regular deposit of amount on the investment. The PTM made at the beginning or end of each compounding period.
This calculator is used to calculate the future value of the investment. With this calculator, the investor can estimate the profitability of the investment.