How Do You Calculate Future Value Formula?
A future value calculation shows how much a sum of money will be worth at a certain point into the future when earning a set interest rate. Future value is useful for calculating returns on such investments as savings accounts or certificates of deposit. The formula for future value has two parts: Calculating the future value factor, which is one plus the interest rate, which is then raised to the power of the number of periods. The second part is the future value, multiply the principal by the future value factor. Determine the interest rate, principal and number of periods. For example, a person opens a savings account that earns 5 percent interest per year. He plans on keeping the amount in the savings account for 10 years. He deposits $20,000 in the account. Add 1 to the interest rate. In our example, 1 plus 0.05 equals 1.05. This is the future value factor. Raise the number calculated in step 2 to the power of the number of periods. In our example, 1.05 ^ 10, equals 1.628895. Mult
