Investment
What is future value?
Future value is the modeled value of one amount today after compounding at an assumed rate for a chosen period.
Definition
Future value is the modeled value of one amount today after compounding at an assumed rate for a chosen period.
Intuition
Each period's interest joins principal, so later interest can earn on earlier interest; the effect grows with time.
Formula
Future value is one amount today multiplied by its compound growth factor.
Formula variables
PV is one amount today; FV is its future value; r is nominal annual rate; m is compounding periods per year; t is years. The periodic rate is r ÷ m over m × t periods.
When to use it
Use it for one deposit or investment under a fixed rate. If you will add money each month, use a recurring-contribution tool rather than pretending every contribution was invested on day one.
Example
- Enter present value 100,000, a 10% annual rate, two years, and annual compounding.
- The compound factor is (1 + 10%)² = 1.21; multiply 100,000 by 1.21.
- Future value is 121,000, total growth 21,000, and cumulative growth 21%.
Common mistakes
Do not treat a fixed assumed rate as a forecast or use a single-payment FV formula for a plan with recurring contributions.
Frequently asked questions
How does FV differ from the compound interest calculator?
FV projects one amount invested today; the compound interest tool also models monthly additions.
What happens when compounding becomes more frequent?
At the same positive nominal annual rate, more frequent compounding generally raises future value slightly. EAR makes the rate difference comparable.
What if the present amount is zero?
Zero principal stays zero. With no principal as a denominator, the display uses 0% for this zero-amount case; it is not an investment return.