Future Value Calculator

Introduction

Our Future Value Calculator helps you determine the Future Value, which is the value of an asset, investment, or cash flow at a future date based on an assumed growth rate.

We use it to estimate what the asset or investment would be worth sometime in the future, which would help investors make their investment decisions accordingly.

When we are trying to value an asset or investment, we are trying to estimate the worth of a stream of future cash flows.

How to use this calculator?

Using the Future Value Calculator, you can calculate the future value, interest rate, present value, and the number of periods by inputting the other variables required for the calculation.

The variables in the calculator are:

Present Value
The investment’s value at the current point in time.

Interest Rate
Depending upon the context, the interest rate can be thought of in three ways.

It could be the minimum expected/required rate of return for the investor to accept the investment, given its risk profile.
It could be considered as the discount rates using which we value future cash flows.
It could also be considered as the opportunity cost that the investors forgo by choosing to invest in a particular asset.

Number of periods
The number of periods after which you want to calculate the future value of the investment.

Compounding Frequency
The frequency of compounding of the asset or investment. This could be annual, semi-annual, quarterly, monthly, weekly, or daily.

Future value
The investment’s value at a future time period (t) with an assumed growth rate in the interim.

What is Future Value?

One of the core principles in finance is that a sum of money is worth more now than the same sum of money at a future date due to its earning potential. This is called the Time Value of Money.

The future value is the value of an investment, asset, or cash flow at a specific date in the future, assuming a specific growth rate.

Investors and financial planners need to estimate how much an investment today will be worth in the future so that they can plan their investments accordingly.

Estimating the future value of an asset can also become tricky depending on the type of asset. First, we have to assume a stable growth rate, and the future value calculation doesn’t consider any losses that might occur in the interim period of consideration.

How is Future Value Calculated?

We can calculate future value using two methods

Simple Interest
Compound Interest

Future Value using Simple Interest

If the investment earns a simple interest, then the future value is calculated using the formula shown below.

FV = P \times (1 + (r\times t))

Where,

FV → Future Value of the asset, investment, or cash flow

r → Interest Rate earned by the asset, investment at simple interest

t → Number of Years

Future Value using Compound Interest

If the investment earns a compound interest, then we can calculate the future value using the formula shown below.

\text{Future\; Value} = PV\;(1+r)^{n}

Where,

PV → Present Value
It is the initial amount the investor invests or the asset’s current value.

r → Growth rate in % Per Annum
This is the rate of growth of the investment or asset.

n → Time Period in Years
This is the duration after which we want to find the future value.

Future Value using Compound Interest Non-Annual Compounding

If the investment earns a compound interest, then the future value is calculated using the formula shown below.

\text{Future\; Value} = PV\;(1+\frac{r}{k})^{kn}

Where,

PV → Present Value

It is the initial amount that the investor invests or the asset’s current value.

r → Growth rate in % Per Annum

This is the rate of growth of the investment or asset.

n → Time Period in Years

This is the duration after which we want to find the future value.

k → Compounding Periods per year

This could be yearly, half-yearly, quarterly, monthly, weekly, or daily.

Compounding Period	k value
Annually	1
Semi-Annually	2
Quarterly	4
Monthly	12
Weekly	52
Daily	365 or 366

Compounding Frequency

Example

Person A invests in an asset at $100,000 that has a rate of growth of 7% and is compounded Annually. The investment’s time period is 10 years after which we can sell the asset and gain the benefits. What is the future value of the asset at the time of selling?

We calculate the future value of the asset using the formula shown below.