FUTURE VALUE CALCULATOR

HOW TO USE FUTURE VALUE CALCULATOR?

Let us first understand how to use the concept of future value before getting down to the use of the future value calculator.

Here is the formula to calculate the future value

Future value = P * (1+r)t

There are some practical limitations in a future value calculator

How Does Future Value Calculators Work?

The future value calculator determines the future worth (FV) of an investment based on a consistent stream of deposits, a fixed interest rate (r), and a specific time frame (t). Here's how to calculate future value:

A = PMT * ((1 + r/n)^(nt) - 1) / (r/n)

Note that this formula assumes that the deposits are made at the conclusion of each time, whether it's monthly or annually.

Where:

A = Future Value of the Investment

PMT = Payment amount for each time period

n = Number of compounding occurrences per time period

t = Number of time periods the money is invested

Example

For instance, consider a scenario where you deposit Rs 10,000 at the end of each month with an 8% interest rate compounded monthly (equivalent to 12 compounding periods per year). You can determine the investment's value after ten years using the following calculations:

Using the future value formula calculator for deposits made at the end of each period:

PMT = Rs 10,000

n = 12 (representing the 12 compounding periods per year)

t = 10 years

A = 10,000 * (((1 + 0.08/12) ^ 120) - 1) / (0.08/12)

A = Rs 18,29,460.

However, if deposits were made at the beginning of each period, you would employ a modified mathematical formula:

A = PMT * (((1 + r/n) ^(nt) - 1) / (r/n)) * (1 + r/n)

Let's perform the calculation using the same parameters as before:

A = 10,000 * (((1 + 0.08/12) ^ 120 - 1) / (0.08/12)) * (1 + 0.08/12)

A = Rs 18,17,345.

How Can a Future Value Calculator Help You?

The future value formula, in its most basic form, comprises the current value of an asset or investment, the interest rate, and the number of periods between the current and future dates. Calculating the future value can be approached in two ways:

However, if you want to find the future value of a series of periodic payments, such as an annuity, you should use the following formula:

• FV = P * [((1 + r/n)^(n*t) - 1) / (r/n)]
• In this context, P stands for the periodic instalment, t represents the investment tenure, n is the compounding frequency, and r is the interest rate.

Advantages Of Using IIFL's Future Value Calculator

• The IIFL Future Value Calculator provides a glimpse of the potential future sum that can be amassed by investing a specific amount at a designated time.
• You have the option to select an investment that yields returns exceeding the rate of inflation over an extended duration.
• This calculator aids in determining whether adjustments such as increasing the deposit amount or altering the frequency of deposits are necessary, and it also assists in pinpointing the investment choice that offers the most favourable return on investment.