Future value
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Can also be calculated as
Invezz is an independent platform with the goal of helping users achieve financial freedom. In order to fund our work, we partner with advertisers who compensate us for users that Invezz refers to their services. While our reviews and assessments of each product on the site are independent and unbiased, brands may pay to appear higher up our table rankings or place ads in specific areas of the site. The order in which products and services appear on Invezz does not represent an endorsement from us, and please be aware that there may be other platforms available to you than the products and services that appear on our website. Read more about how we make money >
The formula for the future value factor is used to calculate the future value of an amount per dollar of its present value.
The future value factor formula is based on the concept of time value of money. The concept of time value of money is that an amount today is worth more than if that same nominal amount is received at a future date. Any amount received today can be invested and receive earnings, as opposed to waiting to receive the same amount with no earnings. An amount of $105 to be received a year from now may be okay if the individual wants $100 today, assuming that the individual can earn 5% otherwise in one year.
It is important when using the formula for the future value factor to match the rate per period with the number of periods. The number of periods should also match how often an investment is compounded.
Reference: financeformulas.net
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