Future Value Calculator
Details of Future Value
Let's imagine that you win the lottery and you win £10,000. You are given two options. You either take the money today or you are given the money in 5 years. There are few reasons to accept the money in 5 years time over today, which is why most people would choose to take the money today.
Example A: With an annual interest rate of 5%, in 5 years your £10,000 could turn in to £12,782.82 compared to if you accepted the money in 5 years time, it would still be worth £10,000. When entering the world of investments, the future value of money and assets is an important concept. Anyone who makes regular investments into a specific instrument will always want to know the value of it after a specific period.
Example B: You choose to invest £10,000 into bonds for the next 10 years. On top of this you have chosen to invest an additional £1,000 each year for the next 10 years. If we assume that these bonds have an interest rate of 5%, after 10 years the future value of this investment will be £28,866.84. Future value is an important and useful thing to look into when purchasing or making investments.
Calculation of Future Value
The values which are described below are very essential when calculating the future value of an investment.
Present Value: The present value is the value of the money you are investing at the current time.
Annual Interest Rate: This value can have a big impact on the future value of your investments. Having a higher annual interest means that there will be a higher future value.
Payment Amount: If you have chosen to make payments on a regular basis then this amount will help you know the value of these payments on a future date.
Number of Payments: This value is largely influenced but how often payments are made and how frequent they occur. If you make greater payments, you will find that you will have a great future value.
Payment Frequency: This value defines how often payments are made. Payments are usually either monthly, quarterly, 6 monthly, or annually. If you make payments more frequently then you will find that your future value is going to be higher.