Future Value Calculator - Calculate Future Value of Investments Online
Future Value Calculator
What is Future Value?
It is a value of an asset or investment at a particular date in future. Future value shows you the amount to which a current asset would grow over some time. This Method gives you an idea of how much an investment today is worth in the future. The future value is important to both investors and financial planners. It helps investors make sound financial decisions based on their financial goals.
Understanding the concept of future value helps you to earn a return above inflation. Inflation is the climb in the prices of goods and services over some time. Your investment must beat inflation over the long-term if you want to achieve crucial financial goals, such as buying a House or accumulating a corpus for children’s higher education and marriage.
Future value is significant for a business. If you invest money in a new project, it is essential to know the return on investment. Future value helps you to calculate the potential return from the project.
What is Future Value Calculator?
The future value calculator is a simulation that compute the future value of an investment. It shows you what your money is worth in the future. The future value calculator consists of a formula box, where you enter the initial investment, periodic investment, rate of interest, and the number of periods. The calculator will display the future value of your investment.
How does Future Value Calculators Work and Formula?
The future value calculator calculates the future value (FV) of an investment for a series of regular deposits, on a set rate of interest (r), and the number of years (t).
You must use the mathematical formula:
A = PMT ((1+r/n)^nt – 1) / (r/n))
(The formula assumes the deposits are made at the end of each period such as month or year).
- A = Future Value of the Investment
- PMT = Payment amount for each period
- n = Number of compounds per period
- t = Number of periods the money is invested
For example, you deposit Rs 10,000 per month (The deposit is made at the end of each month) at an interest rate of 8% compounded monthly. (This is 12 compounds per period). You may calculate the value of the investment after 10 years as follows:
PMT = Rs 10,000
n = 12 (Number of compounds per period is 12 for monthly compounding)
t = 10 years
A = (10,000(((1+0.08/12)^(120) – 1) / (0.08/12)))
A = Rs 18,29,460.
You have the mathematical formula if deposits are made at the beginning of each period:
A = PMT (((1 + r/n)^(nt) – 1) / (r/n)) * (1+r/n)
Let’s do the calculation with the same figures as above.
A = 10,000 (((1+0.08/12)^120 -1) / (0.08/12) * (1+0.08/12)
A = 18,17,345
How to use ClearTax Future Value Calculators?
The ClearTax Future Value Calculator shows you the future value of your investments in seconds. To use the ClearTax Future Value Calculator:
- You must enter the monthly investment.
- Enter the annual interest.
- You then select the compounding as monthly, quarterly, half-yearly, or yearly.
- Enter 0 as the Present Value.
- Select the number of years for the investment.
- You then select PMT as the beginning or end of each compound period.
- The ClearTax Future Value Calculator displays the future value of the investment.
Benefits of Using ClearTax Future Value Calculator Online
- The ClearTax Future Value Calculator shows you how much amount is accumulated in the future if you invest a certain amount at a particular time.
- You can choose an investment that offers a return above inflation over the long-term.
- The calculator helps you decide if you must increase the deposit amount, the number the times you deposit the investment and also choose the investment option where you get the best return on investment.
Frequently Asked Questions
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