This is why one should avoid widthrawing from a savings account and why reinvesting the interest pays off so much. Note the large effect of the relative small annual withdrawals (just 5% of the initial investment) - without them the FV with 10-year annuity would be $370,722, or nearly $100,000 on top of the value without the postponed consumption. The future value of the annuity increases the more time we are willing to wait to receive it, even if the rate of return and the initial investment are exactly the same. This is a great example of how the time value of money operates. Future value of annuity example table Initial Value What is the future value of this investment if we expect 1, 2, 3, 5, or 10 years from now? The answers are shown in the table below. Let us assume a $100,000 investment with a known annual interest rate of 14% from which one wants to withdraw $5,000 at the end of each annual period. When you enter an annual interest rate it calculates the future value of annuity, but it can be used for monthly, daily, quarterly, etc.
Future value financial calculators software#
This simple equation is what drives our software as well. Where FV is the future value of the asset or investment, PV is the present or initial value (not to be confused with PV which is calculated backwards from the FV), r is the Annual interest rate (not compounded, not APY) in decimal, t is the time in years, and n is the number of compounding periods per unit t. The basic future value can be calculated using the formula: It should also be noted that the future value calculated is nominal: it doesn't take into account inflation or other factors that might affect the actual value of money in the future. The result also depends on the accuracy of the predicted interest rate - even small discrepancies here can result in relatively large differences in actual results due to the compounding effect. Most importantly, it assumes a steady rate of return. Like any other mathematical model, future value calculation has assumptions whose violation leads to inaccurate results.
Knowing the future value can help you decide between investing one way or another, or spending the money now. Using the future value calculator can help you plan and allocate resources more intelligently. The investment could be a deposit in a savings account, a business project, stock market portfolio, investment fund, etc. It is useful when you want to estimate the pay off from an investment with a given present value by taking the time value of money into account.
Optionally, you can specify periodic contributions or withdrawals and how often these are expected to occur. This financial calculator can help you calculate the future value of an investment or deposit given an initial investment amount, the nominal annual interest rate and the compounding period.
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