What is the accumulated value?

The accumulated value of the investment is equal to the amount originally invested plus any interest that will increase throughout the life of the investment. This value is often used in discussions on annuits that are investments such as bonds that apply in some regular payments to the investor. Finding the accumulated value requires to know the interest rate of the investment, the amount where the interest will be enhanced and the original amount of the investment. The formula for this value shows the investor how much his investment stands at present, although the actual payouts will not be realized only in the future. Fixed income essentially means that investors will receive regular payouts at certain times, usually with some kind, if the interest rate is including. This can work in both ways because people often make regular payments to repay loans to buy items with high price or cars. In any case, the total payout value known as the accumulated value is the amount that the creditor receives in the transaction after the completionThe transaction.

For example, imagine someone who buys a bond with a nominal value of $ 5,000 (USD), which pays off an annual interest rate of two percent in five years. This means that at the end of each year the investor will receive the main USD 1000 USD. In addition, they also receive an interest rate that brings a higher payout every year. The accumulated value would add up to $ 5,000 plus all interest payments.

There is a formula for determining the accumulated value. If you want to calculate it, start by starting at an interest rate plus once and increasing it to power equal to the number of payments on the annuity. Then you subtract one of that Number, and divide the difference in the interest rate. In the end, it multiplies a total of cash flow in each payment. In the above example, the interest rate is 0.02, the number of payments is five and the cash flow for the period is $ 1,000. Connecting all these numbers to the collected assessmentThe formula provides a total of $ 5204.04.

In this example, the accumulated value shows the investor what to expect from its original investment. It is an example of the time of time value of money, which is an important concept with annuity payments. Understanding this concept can help investors realize whether the investment will be in comparison with the values ​​of inflation, which over time reduces the value of money,