What are the best tips for determining the future value of a one -time amount?
Determination of the future value of a one -time amount may be useful for finance management, retirement planning or decision -making to choose which investment vehicle. Financial formulas and calculations are complicated, creating the simplest method for using one of the financial calculators that can be found on the website of personal finances. Inputs include: interest rate, number of years, flat -rate amount and whether the interest is composed. The search for a “financial calculator” will bring many results to choose the most suitable. Financial calculators are based on the assumption of fixed interest rates, which is the most accurate for shorter periods of time. If possible, find a calculator that allows multiple interest rates.
Interest rates do not make a huge jump from year to year in most countries, but over 10 or 15 years, the rate can change quite dramatically. For long -term estimates of future valuesSingle amounts could therefore be more accurate to calculate the value of a number of five -year estimates with different interest rates for every five years. For this purpose, enter the current one -time amount, an interest rate estimate for the first five years and "5" for the number of years. Use the result as a director, enter an interest rate estimate for the second five -year period and use this result as an initial value for another five -year period.
It is necessary to know whether the interest is simple or folded, and if it is composed, how many times a year it is composed. Simple interest is paid once a year only to the original amount of principal and the compound interest means that the deposit receives interest on interest and principal. If the interest is paid once a year, it is comprehensive every year; The monthly composition means that interest is paid to the account every month and the future flat rate will grow even faster.
When entering the interest rate in any calculator, be careful. Some apply for an annual rate as a percentage but others could apply for DEsetic place. Five percent would be "5" for the first but "0.05" for the second. If the future value of a single sum appears to be incredibly high or low, check that the interest rate was entered in the correct format.