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Future Value Formula:
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The Future Value formula calculates how much an investment will be worth in the future based on compound interest. It's essential for financial planning and investment decisions, helping you understand the growth potential of your money over time.
The calculator uses the compound interest formula:
Where:
Explanation: The formula accounts for compound interest, where interest is earned on both the principal and accumulated interest over multiple compounding periods.
Details: Understanding future value helps in retirement planning, investment comparisons, and making informed financial decisions. It shows the power of compound interest over time.
Tips: Enter the principal amount in ZAR, annual interest rate as a decimal (e.g., 0.05 for 5%), number of compounding periods per year, and time in years. All values must be positive numbers.
Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest calculates interest on both principal and accumulated interest.
Q2: How does compounding frequency affect future value?
A: More frequent compounding (monthly vs. annually) results in higher future values due to interest being calculated more often.
Q3: What are typical compounding periods?
A: Common periods include annually (1), semi-annually (2), quarterly (4), monthly (12), and daily (365).
Q4: Can I use this for different currencies?
A: Yes, the formula works for any currency, but ensure all amounts are in the same currency unit.
Q5: How accurate is this calculation for real investments?
A: This provides a theoretical estimate. Actual returns may vary due to fees, tax implications, and market fluctuations.