How to Calculate Future Value
Future value equals the present amount times (1 + r) raised to the number of years: FV = PV × (1 + r)ⁿ.
The Future Value formula
Calculator
Enter an amount, an interest rate and a number of years to get the future value and the interest earned.
The amount you hold or invest today.
Entered as a percent, so 6 means 0.06 in the formula.
The number of compounding periods the money is left alone for.
$2,500 left for 4 years at 6% is worth $3,156.19 at the end.
- Growth factor
- 1.26247696
- Interest earned
- $656.19
- Simple interest for comparison
- $600
- Compounding advantage
- $56.19
- Verdict
- Compounding wins
One plus the rate as a decimal, raised to the number of years.
Future value minus the amount you started with.
PV times the rate times the years, with no interest earned on interest.
Compounding beats simple interest by $56.19 over this period.
How to calculate Future Value, step by step
- 1Identify the present value (PV). The dollar amount you hold or invest today.
- 2Convert the interest rate to a decimal (r). Divide the percent by 100, so 6% becomes 0.06.
- 3Count the number of periods (n). Use the number of compounding periods, usually years, that the money is invested for.
- 4Compute the growth factor (1 + r)ⁿ. Add 1 to r, then raise that sum to the power n.
- 5Multiply PV by the growth factor. FV = PV × (1 + r)ⁿ, the amount the investment is worth at the end.
Worked example: Future Value
Find the future value of $2,500 invested for 4 years at 6%. Convert the rate: r = 0.06. Compute the growth factor: (1 + 0.06)⁴ = 1.26247696. Multiply: FV = 2,500 × 1.26247696 = $3,156.19. Interest earned is 3,156.19 − 2,500 = $656.19, which beats the $600 of simple interest (2,500 × 0.06 × 4) by $56.19.
Future Value questions
How is future value related to present value?
They are inverse operations. Future value grows a present amount forward with PV × (1 + r)ⁿ, while present value discounts a future amount back with FV ÷ (1 + r)ⁿ.
What if interest compounds more than once a year?
Divide the annual rate by the number of periods per year and multiply n by that same number: FV = PV × (1 + r ÷ m) raised to the power (m × n). At 6% compounded semiannually, $2,500 grows to $3,166.93 in 4 years.
Why does a higher interest rate raise future value?
A larger r makes the growth factor (1 + r)ⁿ bigger, so the same starting amount grows to more. The gap widens as n rises because the effect compounds.
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