# Future value

The future value of money is how much an investment is worth after compounding for a given numbers of terms and with a given interest rate.

For example, you put $100 into a bank account. The interest rate is 6 % p.a. (annual). You want to know what your deposit is worth after 10 years. The value of your deposit after 10 years is: ## Concepts and formulas Future value The future value is the value of a deposit after compounding for a given numbers of terms and with a given interest rate. The future value (FV) is given by: Present value The present value is the initial deposit. If you put$100 into a bank account, the present value is \$100. The formula for the present value (PV) is given by:

Term
The term is the period between the adding of interest. So the number of terms is the number of times the interest is added.
If the interest rate is 6 % p.a. (annual), there is one term per year.
It is possible to have more than one term per year. The formula for the number of terms (n) is given by:

Interest
The interest is what you profit from your deposit every term. The interest is a percentage of the deposit, the interest rate, which is written as a decimal number. That is, 9 % is written as 0,09. The formula for the interest rate (r) is given by:

## Calculate the future value

 Present value (PV): Interest rate (r): Number of terms (n): Future value (FV):

## Where is the formula for future value used?

The formula for future value is used, when you want to save up money, get a loan or when whenever you need to calculate compound interest.

The formula for future value can also be used to project the effect of inflation in a given society increases, like for instance, how much the price of goods and services.