What is the future value?
The future value is how much a certain amount of money will be in the future if it is invested at a known interest rate. It is calculated by the time value of the equation of money on the basis of interest rates and current values. Common variations are the future value of investment, which receives simple interest, investment earnings and annuity.
The idea of the future value of money is that $ 1,000 in the US (USD) today has more than $ 1,000 per year per year. This is because money can be placed in a savings account or on some other investments and will receive interest during the year. This is called the time value of money and is used in many investment systems from savings accounts and pension plans, to lottery jackpots that provide annual payouts.
The simplest formula of the future value (FV) is an investment that receives simple interest. The present value (PV) is the amount to be invested today. The interest rate (I) is an annual rate. Time (t) is the time in the future to be calculated. Formulais: fv = pv*(1 + i*t).
Simple interest is rarely used in real life applications, where the interest is much more common. The formula for the future investment value with compound interest is: FV = PV*(1+I) For example, if the original investment amount is $ 2,000, the investment rate is 4%and the investment is for ten years, then the future value of FV = 2000*(1+0.04)
10 = 2 960.49 USD. This means that today it has $ 2,000 worth $ 2,960.49 in ten years, due to 4% interest rate.
Interest rates will fluctuate for ten years. If the interest rates rise to 8%, the new investor could buy a similar product, as the above example and the future value of the new investment product would be $ 4,317.85. The first investment whose intesazba est is locked to 4% for ten years is less attractive and will be sold at a discounted rate. If interestThe rates fall below 4%, the initial investment is considered excessive and will trade as a higher value.
Anuits are financial products that provide regular payouts for a fixed interest rate. The simplest forms of annuity are regular deposits to a savings account that pays monthly interest and mortgages with monthly payments on principle and interest. The following formula is used to calculate the future annuity (FV) with a payout (A), interest rate (I) and time (N): FV = (A * (1+I)
life annuity is the means that are fed and grow for some time when they begin to pay a constant stream of income, usually for a pension. Future values are carefully studied when life prices and many prerequisites are required, such as retirement and interest rates. The commuting value of the pension fund, the type of annuity of life is the amount of money necessary to meet the pension contract when they begin payments and are based on future annual future values.