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Time Value of Money: Calculating Future Value

College-Cram.com:: Finance:: Time Value of Money:: Calculating Future Value
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Description: Future value is a term given to the amount of money we would have at some point in the future, based on what happens between now and then. Use this tutorial to learn how to calculate the future value of an annuity given the present value, periodic interest rate, and number of periods.
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Contents

  1. Annuities: Calculating Future Value
  2. Future Value and Compounding
Future value is a term given to the amount of money we would have at some point in the future, based on what happens between now and then. Use this tutorial to learn how to calculate the future value of an annuity given the present value, periodic interest rate, and number of periods.

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Future Value and Compounding

Future value is a result of the compounding of interest earned on the present value, or starting amount. As time progresses, the periodic interest is added to the starting amount and the next periodic interest amount is calculated based on that.

As such, the amount of interest earned over the entire time period can be found by subtracting the present value from the future value:

Amount of Interest = FV - PV 

Click this link to learn more about compound interest and other Time Value of Money concepts.

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