Use the Future Value Calculator to do research on an investment and decide whether it matches your goals
An asset’s value changes constantly for several reasons, such as inflation as well as any returns gained from the asset. Inflation erodes an asset, while returns can add real value to an asset. When returns are earned, they are higher in value than inflation. Therefore, over a period, your asset can only grow. This means your asset has a value at a time in the future. A future value calculator online helps to compute growth such as this, or the asset’s future value.
The ideal way to compute any asset’s value at a future date is by using an online tool, the future value calculator. This is freely available on most websites of financial institutions and is feasible for knowing how an asset will be valued in the future.
If you wish, you could calculate the future value of any asset by using the formula of simple interest. You could also use compound interest to undertake calculations. Computing the time value of an asset could be a tedious task if done manually. Instead, a future value calculator is straightforward as it operates according to inputs by users. All you are required to do is feed in inputs such as the initial amount of investment, the return (a percentage), the estimated percent of inflation, and the period of the investment (years). Online, a variety of these exist for different investment avenues and instruments. Such future value calculators, being user-friendly, are popular.
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An asset’s value, compared to the present value, can change. The current value may grow, reduce, or remain the same in the future. It is imperative for investors to know what their assets will be valued at in the future to plan their financial goals. In case they find out that the value would become inadequate, corrective action can be taken at the current time. Therefore, it is crucial for businesses and individuals to grasp the concept of their asset’s future value.
Any investment’s future value depends on the return in the future, inflation, and rates of tax. An investment becomes worthwhile if returns offered exceed inflation in the future. With a future value calculator, you get an invaluable tool to gauge monthly investments by feeding in simple details like your investment amount and instalments (if monthly), as well as your duration of investment.
You may use the feature of the calculation for compounding on a future value calculator. A huge array of different calculators exist for just this purpose and their user-friendly interfaces make them ideal to use
There are two methods of calculating the future value - simple interest and compound interest future value. Both are a bit different from each other. For simple interest, the following formula is used to compute the FV:
FV = PV (1 + r)n
● PV = the present/current monetary value
● r = the interest rate
● n = the investment duration
A common example that makes use of FV compounding is an annuity. In an annuity, a specific sum gets invested over a duration. For a compounding FV, the following formula applies:
FVOA = A ×(1 + r)n – 1
This is challenging for a lay person to grasp so a future value calculator in the form of an annuity calculator is perfect to use