Future Value Formula
Future Value = PV * (1 + i)n
1.PV = the value at time zero
2.FV = the value at time n
3.i = the discount rate (or interest rate)
4.n = the number of periods
Future Value Example
Chase has $500. He is considering using a bank that is offering 6%, how much will he have in 2 years?
He will have $561.80 in two years.
What is Future Value?
Future value, also referred to as FV, is a finance formula used to calculate the expected value of money in the future; to recognize the time value of money. Often investors want to know what their cash, savings, or other investments will be worth in the future to help evaluate investment alternatives and make investing decisions. Future value takes Compound Interest into consideration, which can have a significant impact on the value of an investment over time.
It is important to note that not only can this be used for personal use, but many businesses such as mortgage lenders, auto lenders, and other financial institutions use this calculation to evaluate investments. See also Present Value Calculator for instances when future value is known and you are looking for the present value.
For example, let's assume you have $100 in savings and would like to know how much it will be worth in 1 year. Given the present value of what you have in savings $100, earning 5% interest (compounded annualy) and we know that the number of years is 1; you will earn $5 in interest, so your future value will be $100 + $5 (interest) = $105.