Future Value (FV) is a financial calculation used when determining the time value of money to determine the “present day value” of a series of financial inputs.
It takes into consideration a value at a time in the present as well as the interest rate and payments occurring each compounding period.
As this calculator is structured to parallel the results of a financial calculator, inputs and outputs will be similar – for example, a negative means an outflow as opposed to a directly negative number.
A financial formula calculates the future value of a sum of money.
There are two separate calculations involved: The base sum as well as the payment schedule.
For the base sum, the formula is:
For a payment annuity that occurs at the end of each period, the formula is:
For a payment annuity that occurs at the beginning of each period, the formula is:
We have $1000 to save now and then $100 per year after for the next 45 years. The account we save to yields 4.3% interest compounded annually. After 45 years, how much will we have saved?
Step 1: Calculate the future value of the fixed portion
Step 2: Calculate the present value of the payment annuity
Step 3: Add the two together
The future value of the account would be 19788.12. The result would be converted from negative (-19788.12) as this would be the amount that would need to be paid out of (cash flow in) the account to reach the balance of 19788.12.