Future Value Calculator

What is a Future Value Calculator?

A Future Value Calculator is a financial tool that helps investors and savers estimate how much their current investments or savings will be worth in the future, given a certain interest rate and time period. This calculator takes into account the power of compound interest, which is interest earned not only on the initial principal but also on the accumulated interest of prior periods.

Formula for Future Value Calculation

The formula for calculating the future value of a present amount is:

\[FV = PV \times (1 + \frac{r}{n})^{n \times t}\]

Where:

• FV = Future Value
• PV = Present Value (initial investment)
• r = Annual Interest Rate (as a decimal)
• n = Number of times interest is compounded per year
• t = Number of years

Calculation Steps

1. Convert the annual interest rate to a decimal by dividing by 100.
2. Determine the number of times interest is compounded per year.
3. Apply the formula to calculate the future value.
4. Calculate the total interest earned by subtracting the present value from the future value.

Example

Let's consider a scenario with the following details:

• Present Value: $10,000
• Annual Interest Rate: 5%
• Time: 10 years
• Compound Frequency: Annually (1 time per year)

Calculation:

1. Convert interest rate: 5% = 0.05
2. Apply the formula: FV = 10000 × (1 + 0.05/1)^(1 × 10)
3. Calculate: FV = $16,288.95
4. Total interest earned: $16,288.95 - $10,000 = $6,288.95

In this example, an initial investment of $10,000 would grow to $16,288.95 after 10 years at a 5% annual interest rate, compounded annually. The total interest earned would be $6,288.95.