Future value is the calculated value of an asset or cash flow at a specific point in the future. It’s a way to measure an investment’s potential worth or to estimate future future value of a single amount earnings from an asset. Now that you know how to compute the future value, you can try to make your calculations faster and simpler with our future value calculator.
Interest Compounded More Often Than Annually
The future value formula can be expressed in its annual compounded version or for other frequencies. Did you know that you can also use the future value calculator the other way around? For example, plug in the present value, the future value, and the interest rate to find how long you need to invest to get the provided future value. Now let’s use the formula above to calculate the future value of a single amount.
What is the difference between future value and future value of an annuity (or annuity due)?
Cell E4 shows the calculated answer for cell E1 after hitting the enter key. Once the enter key is pressed, the hint banner hovering over cell E3 will disappear. The second example of the FV function in our example spreadsheet is in cell E6. Here, the actual numerical values are used in the FV function equation rather than cell references.
- However, one of the simplest methods is to use tables that give the future value of $1 at different interest rates and for different periods.
- If the returned future value is negative or much lower than expected, most likely, either the pmt or pv argument, or both, are represented by positive numbers.
- With the mobile version of our application, you can also use our FV calculator wherever and whenever you want.
- Throughout our explanation we will utilize future value tables and future value factors.
Why You Can Trust Finance Strategists
” Knowing how to go about such a review will require you to understand the concepts you are attempting to apply and what you are trying to make the calculator do. Further, it is critical to understand the relationships among the different inputs and variables of the problem. If you do not fully understand these relationships, you may end up with an incorrect answer.
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In our earlier examples we assumed compounding was on an annual basis. Different compounding periods, like quarterly or monthly, can significantly affect the investment’s future value. As a rule, the more frequently interest is compounded, the greater the future value will be. The future value calculation allows investors to project the amount of profit that can be generated by assets. The future value of an asset depends on the type of investment because the future value formula assumes a stable growth rate.
Example 1: Future Value of a Single Payment or Lump Sum
To solve any compound interest question, you must key in six of them. To solve for the missing variable, press CPT followed by the variable. As shown above, the future value of an investment can be found by using the present value of a single amount formula and adjusting for compound interest. The present value of a single amount formula is most often used to determine whether or not an investment opportunity is good. Similar to future value tables, present value tables are based on the mathematical formula used to determine present value. Due to the relationship between future and present values, the present value table is the inverse of the future value table.
