1. What is the Future Value Formula?

The Future Value formula calculates the value of a series of regular payments (annuity) at a specified future date, considering a constant interest rate. It's commonly used for retirement planning and investment projections.

2. How Does the Calculator Work?

The calculator uses the Future Value formula:

Where:

• \( PMT \) — Periodic payment amount ($)
• \( r \) — Interest rate per period (decimal)
• \( n \) — Number of periods

Explanation: The formula calculates the accumulated value of regular payments earning compound interest over time.

3. Importance of Future Value Calculation

Details: Future value calculations are essential for retirement planning, investment analysis, and financial goal setting. They help individuals understand how regular contributions can grow over time.

4. Using the Calculator

Tips: Enter the periodic payment amount in dollars, interest rate as a decimal (e.g., 0.05 for 5%), and number of periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ordinary annuity and annuity due?
A: This formula calculates ordinary annuity (payments at end of period). For annuity due (payments at beginning), multiply result by (1+r).

Q2: How often should periods be matched with payments?
A: Ensure periods match payment frequency (monthly payments = monthly rate and periods, annual payments = annual rate and periods).

Q3: Can this formula handle variable interest rates?
A: No, this formula assumes a constant interest rate throughout the investment period.

Q4: What if the interest rate is zero?
A: When r=0, the formula simplifies to FV = PMT × n (simple multiplication of payment by number of periods).

Q5: How accurate is this calculation for real-world scenarios?
A: It provides a theoretical estimate. Actual results may vary due to changing rates, fees, taxes, and compounding frequency differences.