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Future Value (Single Sum) Calculator

Value of an asset at a future date.

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Future Value

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Overview

The Future Value equation calculates the expected worth of a current asset at a specific date in the future based on a constant rate of growth. It provides the mathematical foundation for compound interest, demonstrating how an initial investment grows when earnings are reinvested over time.

Symbols

Variables

FV = Future Value, PV = Present Value, r = Interest Rate, n = Periods

Future Value
$
Present Value
$
Interest Rate
Periods

Apply it well

When To Use

When to use: This formula is applied when determining the end balance of a lump-sum investment or loan that earns interest at a fixed rate. It assumes that the interest rate remains constant throughout the duration and that no additional deposits or withdrawals are made.

Why it matters: Understanding future value allows individuals to grasp the long-term impact of inflation and the exponential power of compounding. It is a critical tool for retirement planning, corporate capital budgeting, and comparing different investment opportunities.

Avoid these traps

Common Mistakes

  • Forgetting to add 1 to r.
  • Exponents vs multiplication.

One free problem

Practice Problem

An investor deposits $5,000 into a savings account that offers a 4% annual interest rate. How much will be in the account after 10 years, assuming the interest is compounded annually?

Present Value5000 $
Interest Rate0.04
Periods10

Solve for:

Hint: Identify your principal (PV), the decimal rate (r), and the time (n), then plug them into the compound interest formula.

The full worked solution stays in the interactive walkthrough.

References

Sources

  1. Britannica: Compound interest
  2. Wikipedia: Time value of money
  3. Fundamentals of Financial Management by Brigham, Eugene F., and Joel F. Houston
  4. Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of Corporate Finance (13th ed.). McGraw-Hill Education.
  5. Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.
  6. Time value of money - Wikipedia
  7. Brealey, Richard A., Myers, Stewart C., and Allen, Franklin. Principles of Corporate Finance. 14th ed. McGraw-Hill Education.
  8. Standard curriculum — A-Level Business / Finance