Information posted in this forum are entirely of the respective members' personal views. The views posted on this open online forum of contributors do not constitute a recommendation buy or sell. The site nor the connected parties will be responsible for the posts posted on the forum and will take best possible action to remove any unlawful or inappropriate posts.

All rights to articles of value authored by members posted on the forum belong to the respective authors. Re-using without the consent of the authors is prohibited. Due credit with links to original source should be given when quoting content from the forum.

This is an educational portal and not one that gives recommendations. Please obtain investment advises from a Registered Investment Advisor through a stock broker

# How to Calculate the Future Value of an Investment

## How to Calculate the Future Value of an Investment

The Problem and the Future Value Formula

Let's say we have $100 and the interest rate is 5%. What will the value of the investment be at the end of the first year? The formula for the future value of this lump sum investment is as follows:

FV1 = PV + INT or PV(1 + I)ⁿ

The first part of this equation -- FV₁ = PV + INT -- reads, "the future value (FV) at the end of one year -- the subscript ᵢ -- equals the present value plus the added value at the specified interest rate.

The next formula presents this in a form that is easier to calculate the value added by the accrued interest -- PV(1 + I)ⁿ -- which reads, "the present value (PV) times (1 + I)ⁿ, where l represents the interest rate and the superscript ⁿ is the number of compounding periods.

Now let's use the example from above. In one year, your $100 lump sum investment earning 5% interest per year will equal:

FV = $100(1 + 0.05) = $105

In this instance, you do not see a superscript (n) for compounding periods because at this point you're solving for the first year only.

If you wanted to determine the value at the end of two years, your calculation would look like this:

FV = $100(1 + 0.05)² = $110.25

You can solve this, which is a compound interest problem, by calculating the value at the end of the first year, then multiplying the outcome by the same 5 percent rate for the second year:

FV = [$100(1+0.05)] + [$105(1+0.05)] = $110.25

You can continue this process to find the future value of the investment for any number of compounding periods.

Spelling out this process way -- manually performing each year's added value from interest, then using that value to make similar calculations for each following year -- makes it clear how we're arriving at the result, but it's time-consuming. Solving for a future value 20 years in the future means repeating the math 20 times. There are faster and better ways of accomplishing this, one of them being the use of a financial calculator.

Future Value of an Investment Using a Financial Calculator

The formula for finding the future value of an investment on a financial calculator is:

FVN = PV(1 + I)ⁿ

Although it doesn't quite look like it, this is the same formula we used when we did the calculations manually.

Incidentally, you can use this formula with any calculator that has an exponential function key -- most do. However, using a financial calculator is better because it has dedicated keys corresponding to each of the four variables we'll be using, speeding up the process and minimizing the possibility of error. Here are the keys you will punch:

Punch N and 2 (for 2 years)

Punch I/YR and 5 (for the interest rate of 5%)

Punch PV and -105 (for the amount of money we are calculating interest on in year 2)

Punch PMT and PMT (there are no payments beyond the first one)

Punch FV, which returns the answer of $110.25

The advantage of the financial calculator over the manual method is obvious. With the calculator, it's no more difficult or time-consuming to solve for a future value 20 years from now than to solve for a single year. Another time-saving method uses a spreadsheet.

Future Value of a Lump Sum Investment Using a Spreadsheet

Spreadsheets, such as Microsoft Excel, are well-suited for calculating time value of money problems. The function that we use for future value of an investment or a lump sum on an Excel spreadsheet is:

=FV(0.05,1,0,-100,0)

To use the function in the worksheet, click on "Formulas" in the title bar, then click on "Financial." You will then see a list of functions. Click on FV. That will open the Formula Builder box where you'll see five boxes labeled rate, nper, pmt, pv and type. If you want to determine the future value at the end of two years, fill out the boxes as follows:

rate (interest rate) = .05

nper (total number of payment periods = 2

pmt (repeated payments, in this case none) = 0

pv (present value, expressed as a negative number) = -100

type (this refers to the timing of subsequent payments) = Since there are none, enter 0

Earlier versions of Excel require that you click on Calculate to see the result. Later versions present the result automatically.

https://www.thebalance.com/how-to-calculate-the-future-value-of-an-investment-393391

**nihal123**- Top contributor
- Posts : 4242

Join date : 2014-02-24

Age : 51

Location : Waga

## Re: How to Calculate the Future Value of an Investment

**Ethical Trader**- Top contributor
- Posts : 3072

Join date : 2014-02-28

The Investor Sentiment - Equity and investments forum for Sri Lankans :: Equities :: Technical Trading

**1**of

**1**

**Permissions in this forum:**

**cannot**reply to topics in this forum

Today at 3:40 pm by Rana

» Booze Calculator

Today at 3:31 pm by කිත්සිරි ද සිල්වා

» Things we are not aware of-Sri Lanka politics.

Today at 1:59 pm by කිත්සිරි ද සිල්වා

» S&P upgrades DFCC Bank’s rating outlook from Negative to Stable

Today at 12:13 pm by CK

» PB. N0000 (People's Bank)

Today at 10:54 am by yellow knife

» Plantations - Analysis by Saliya

Yesterday at 11:31 am by lanka

» ඇලබාමා මැතිවරණයෙන් ඩොනල්ඩ් ට්රම්ප්ට පරාජයක්

Wed Dec 13, 2017 5:17 pm by Ethical Trader

» දිවියෙන් සමුගැනීම සමරන්න සාදයක්!

Wed Dec 13, 2017 5:12 pm by Ethical Trader

» පැසිෆික් 'ළදරු දූපත' අඟහරු හඳුනාගැනීමට මගක්

Tue Dec 12, 2017 8:12 pm by CK

» Best combination in Sinhala music: Prem+Victor

Tue Dec 12, 2017 3:49 pm by CK

» JKH trades in a tight channal

Tue Dec 12, 2017 12:09 pm by lanka

» Sri Lanka to push ahead with shipping liberalization

Tue Dec 12, 2017 10:13 am by Ethical Trader

» Investment in listed companies.

Tue Dec 12, 2017 8:45 am by Ethical Trader

» TPL.N0000 (TALAWAKALE PLANTATIONS )

Sun Dec 10, 2017 6:59 pm by කිත්සිරි ද සිල්වා

» Trading

Sat Dec 09, 2017 7:42 pm by The Alchemist

» In the Meantime, Within Our Shores !

Sat Dec 09, 2017 5:39 pm by Ethical Trader

» ඩොලර් මිලියන 251.4 ක IMF තෙවන ණය වාරිකය අනුමතයි

Fri Dec 08, 2017 5:13 pm by Ethical Trader

» IMF approves US$ 251.4 mn to Lanka

Fri Dec 08, 2017 5:11 pm by Ethical Trader

» Strong uptick in exports, FDI

Fri Dec 08, 2017 12:09 pm by Ethical Trader

» Sri Lanka needs more taxes to cover SOE losses,

Fri Dec 08, 2017 12:04 pm by Ethical Trader

» ජෙරුසලමේ තත්ත්වය : ට්රම්ප් පියවරට එරෙහිව පලස්තීනුවෝ වීථි බසිති

Fri Dec 08, 2017 11:56 am by Ethical Trader

» Far reaching new Securities Exchange Bill gazetted

Thu Dec 07, 2017 5:39 pm by Ethical Trader

» Is he an Aladdin with a magic lamp

Thu Dec 07, 2017 5:37 pm by Ethical Trader

» CMEC to build 400 MW natural gas power plant in Sri Lanka

Thu Dec 07, 2017 5:35 pm by Ethical Trader

» Cabinet approves signing of share ownership agreement on Hambantota Port

Thu Dec 07, 2017 5:35 pm by Ethical Trader

» ශ්රී ලංකාව ලෝකයේ දූෂිතම රටවල් හතර තුලට වැටේ..

Thu Dec 07, 2017 5:31 pm by Ethical Trader

» හම්බන්තොට වරාය චීනයට බාර දීම 09 වෙනිදා

Thu Dec 07, 2017 12:50 pm by Ethical Trader

» Dividend Announcement

Tue Dec 05, 2017 5:06 pm by Ethical Trader

» පළාත් පාලන ඡන්දයේ ඇස්තමේන්තු ගත වියදම බිලියන 3 ඉක්මවයි

Tue Dec 05, 2017 2:31 pm by guruji

» ඉන්දියා යාමට ගිය ක්රීඩකයන් ගුවන්තොටේදී යළි කැඳවේ

Tue Dec 05, 2017 2:21 pm by Ethical Trader

» උතුරු කොරියානු මිසයිලය : ගුවනේදී "කැතේ පැසිෆික් කාර්ය මණ්ඩලය දුටුවා""

Tue Dec 05, 2017 2:17 pm by Ethical Trader

» මෙක්සිකෝවේ "කොලපැහැ රත්රන්" රකින "අලිගැටපේර පොලිසිය"

Tue Dec 05, 2017 2:06 pm by Ethical Trader

» ජෙට්වින්ග් කොටස් වෙළෙඳපොළ සම්ප්රාප්තියට දින නියම වෙයි

Mon Dec 04, 2017 1:14 pm by nihal123

» Flying is the Safest mode of Transport

Sun Dec 03, 2017 9:08 am by කිත්සිරි ද සිල්වා

» කෙලවලු පැටවුන් අල්ලන්න එපා: ධීවරයන්ට අවවාදයක්

Fri Dec 01, 2017 7:40 pm by කිත්සිරි ද සිල්වා

» එජාප මන්ත්රීවරුන්ට ජනාධිපති විවේචනය කිරීම තහනම්

Fri Dec 01, 2017 11:58 am by Ethical Trader

» හිමගිර පාමුළ විමුක්තිය සොයන බෞද්ධ භික්ෂුණින් වහන්සේ

Fri Dec 01, 2017 11:47 am by Ethical Trader

» දකුණු කොරියාව: ජනපති මෛත්රීට අනපේක්ෂිත අමුත්තෙක් මුණගැසෙයි

Fri Dec 01, 2017 11:36 am by Ethical Trader

» Laughter the Best Medicine

Thu Nov 30, 2017 6:08 pm by කිත්සිරි ද සිල්වා

» ඒකාබද්ධ විපක්ෂය සමග සාකච්ඡා අසාර්ථකයි: ශ්රීලනිපයට "ජයග්රහණය විශ්වාසයි"

Thu Nov 30, 2017 4:12 pm by Ethical Trader

» සීමා නීර්ණ ගැසට් පත්රය අවලංගු කළ පෙත්සම ඉවතට

Thu Nov 30, 2017 4:08 pm by Ethical Trader

» අයහපත් කාලගුණය: මරණ සංඛ්යාව ඉහළට

Thu Nov 30, 2017 3:57 pm by Ethical Trader

» "උතුරු කොරියාව නව බැලිස්ටික් මිසයිලයක් විදලා" - දකුණු කොරියාව

Wed Nov 29, 2017 1:01 pm by Ethical Trader

» Govt. to release 50 acres of capital land for investments

Tue Nov 28, 2017 11:32 am by කිත්සිරි ද සිල්වා

» Higher oil bill overshadows strong growth in exports

Tue Nov 28, 2017 11:12 am by Backstage

» නැනෝ ඉලෙක්ට්රික් හෙට සිට වෙළෙඳපොළේ – එක් ආරෝපණයකින් කිලෝමීටර 200 ක ධාවනයක්

Mon Nov 27, 2017 5:43 pm by Ethical Trader

» Deadly earthquakes could hit a billion people next year

Mon Nov 27, 2017 10:40 am by Backstage

» Only Sri Lanka’s top five stockbrokers profitable

Mon Nov 27, 2017 10:22 am by Backstage

» Brush manufacturer BPPL faced tough six months

Mon Nov 27, 2017 10:17 am by Backstage

» Sri Lanka's got Talent

Sun Nov 26, 2017 11:33 pm by sashimaal