The Investor Sentiment - Equity and investments forum for Sri Lankans
Search
 
 

Display results as :
 


Rechercher Advanced Search

Latest topics
» ලංකාවේ සංචාරය නිසා බ්‍රිතාන්‍ය මන්ත්‍රීට පාර්ලිමේන්තු තහනමක්
Today at 6:09 pm by Ethical Trader

» Should CSE be like this? Whose FAULT is it?
Today at 6:06 pm by Ethical Trader

» අනං මනං! #/+?.<>
Today at 2:31 am by Yin-Yang

» Happy Birthday
Yesterday at 5:37 pm by pathfinder

» Dividend Announcement
Fri Jul 20, 2018 2:03 am by nihal123

» සදහම් හඩ
Thu Jul 19, 2018 6:53 am by Ethical Trader

»  Woman finds frog parts in her packet of 'kottu'
Tue Jul 17, 2018 5:21 pm by Ethical Trader

» Debenture issues
Sat Jul 14, 2018 10:34 pm by Danidu

» Quick Checklist for Selecting a Stock
Sat Jul 14, 2018 11:42 am by slstock

» Hello and CSE ?
Fri Jul 13, 2018 10:05 am by slstock

» Films - To Watch List
Fri Jul 13, 2018 8:15 am by yellow knife

» කොටස් වෙළෙඳපොළේ ආයෝජනයේ දී දේශපාලන සබඳතා අනාවරණය අනිවාර්යයි
Thu Jul 12, 2018 9:02 pm by spw19721

» ගුහාවේ සිරවී සිටින දරුවන් පිටතට ගෙන්න මාස 04 ක් ගතවෙන ලකුණු
Wed Jul 11, 2018 7:43 am by serene

» කොළඹ කොටස් තවමත් අවුරුදු 8 කට කලින් තිබුණු තැනමයි
Wed Jul 11, 2018 7:37 am by serene

» 2018 ජූනි මාසයේ ඩොලර් මිලියන 434.53 කින් දී සංචිත වැඩි වුණේ මෙහෙමයි
Tue Jul 10, 2018 4:00 pm by Ethical Trader

» නිවාඩුවට රට යනවාටත් බද්දක්. සියලු වාහන හිමියන් බදු ගෙවිය යුතුයි – දේශීය ආදායම් කොමසාරිස්
Mon Jul 09, 2018 5:49 pm by Ethical Trader

» අටවන වරටත් ශ‍්‍රී ලංකාවේ හොඳම බැංකුව ලෙස ෆයිනෑන්ස් ඒෂියා කොමර්ෂල් බැංකුව තෝරාගනී July, 7, 2018
Mon Jul 09, 2018 11:53 am by nihal123

» ETI මිල දී ගන්නේ සිංගප්පූරු – ශ්‍රී ලංකා හවුල් සමාගමක්
Mon Jul 09, 2018 7:57 am by serene

» සුළු හා මධ්‍ය පරිමාණ ව්‍යවසායකයින් වෙනුවෙන් කොළඹ කොටස් වෙළෙඳපොළේ EMPOWER පුවරුව දියත් කෙරේ
Fri Jul 06, 2018 9:26 pm by Ethical Trader

» Sri raises fuel prices, future revisions weekly
Fri Jul 06, 2018 6:35 pm by Ethical Trader

» Sri Lanka holds rates, amid external jitters
Fri Jul 06, 2018 10:35 am by Ethical Trader

» Sri Lanka rupee weakens, stocks gain 1.22-pct
Fri Jul 06, 2018 10:34 am by Ethical Trader

» Sri Lanka's SMEs get chance to raise equity on liberalized board
Fri Jul 06, 2018 8:07 am by The Invisible

» Yahoo බිඳ වැටෙයි
Thu Jul 05, 2018 6:42 pm by Ethical Trader

» මුල් මාස 06 දී ලක්ෂ 11 ½ ක සංචාරකයින් ඇවිත්
Thu Jul 05, 2018 6:41 pm by Ethical Trader

» ධම්මික ශ්‍රී ලංකාවේ මුල් වරට Artificial Intelligence යොදා ගත් අධ්‍යක්ෂ මණ්ඩල රැස්වීමක් කැඳවයි
Thu Jul 05, 2018 8:01 am by serene

» තව වසර 3 කින් කොළඹ ඒක පුද්ගල ආදායම ඩොලර් 12,650 යි
Wed Jul 04, 2018 5:39 pm by Ethical Trader

» රාජපක්ෂ ආධාරකරුවන් ශ්‍රී ලංකාවේ මාධ්‍යවේදීන් බියවැද්දීම වැරදියි - New York Times
Tue Jul 03, 2018 5:32 pm by Ethical Trader

» කොමර්ෂල් බැංකුවට නව කළමනාකාර අධ්‍යක්ෂවරයෙකු සහ ප‍්‍රධාන මෙහෙයුම් නිලධාරියෙකු පත්කෙරේ
Tue Jul 03, 2018 5:27 pm by Ethical Trader

» Sri Lanka's ETI Finance able to settle small depositors if liquidated
Mon Jul 02, 2018 5:30 pm by Ethical Trader

» Cartoon of the day...
Sun Jul 01, 2018 9:10 pm by pee ratio

» උදයංග වීරතුංගට "ස්වේච්ඡාවෙන් ගමන් යන්න බැහැ"
Fri Jun 29, 2018 5:19 pm by Ethical Trader

» Sri Lanka s state hotel sales to go ahead next month: Finance Minister
Fri Jun 29, 2018 5:14 pm by Ethical Trader

» මාස 02 කදී කොටස් වෙළෙඳපොළ සියයට 4 කින් කඩා වැටිලා
Thu Jun 28, 2018 5:59 pm by Ethical Trader

» කොටස් වෙළෙඳපොළේ ආයෝජන ඉවත් කර ගැනීමට ජාතික ඉතිරිකිරීමේ බැංකුව යෝජනා කැඳවයි
Thu Jun 28, 2018 11:14 am by Ethical Trader

» සුරන්ගනීට මාලු ගෙනාවා - FIFA - Russia - 2018
Mon Jun 25, 2018 11:29 am by Ethical Trader

» Enterprise Sri Lanka to give extra credit support for women, disabled soldiers
Sun Jun 24, 2018 8:42 pm by sashimaal

» HUNA.N0000
Sat Jun 23, 2018 11:42 am by pjrngroup

» 2018 මැයි මස උද්ධමනය සියයට 2.1 ක් දක්වා ඉහළට
Sat Jun 23, 2018 8:31 am by Ethical Trader

» Laughter the Best Medicine
Fri Jun 22, 2018 8:11 pm by nihal123

» Sri Lanka is recovering, Central Bank threat looms: Bellwether
Fri Jun 22, 2018 10:20 am by The Invisible

» Sri Lanka's new forex law gets IMF thumps up
Fri Jun 22, 2018 10:16 am by The Invisible

» EU slaps tariffs on US as trade war erupts
Fri Jun 22, 2018 10:14 am by The Invisible

» Top monk asks Sri Lanka’s ex-defence chief to return as ‘Hitler’
Fri Jun 22, 2018 10:12 am by The Invisible

» May inflation at 2.1%
Fri Jun 22, 2018 2:06 am by sashimaal

»  මෙරට විශාලම ආයෝජනය වන හම්බන්තොට වරායේ අවසන් ආයෝජන මුදල වරාය අතට බාර දෙයි
Thu Jun 21, 2018 4:59 pm by Ethical Trader

» CCS.N0000 ( Ceylon Cold Stores)
Thu Jun 21, 2018 4:56 pm by Ethical Trader

» HHL.N0000 ( Hemas Holdings PLC)
Thu Jun 21, 2018 4:48 pm by Ethical Trader

» රුපියල තවදුරටත් පාවීමට ඉඩහැරිය යුතුයි - ජාත්‍යන්තර මූල්‍ය අරමුදල
Thu Jun 21, 2018 7:46 am by serene

» රජයේ සුරැකුම්වලින් රුපියල් බිලියන 2.7 ක විදෙස් ආයෝජන සතියක් තුළ දී ඉවතට
Wed Jun 20, 2018 9:11 am by serene

July 2018
SunMonTueWedThuFriSat
1234567
891011121314
15161718192021
22232425262728
293031    

Calendar Calendar

Disclaimer


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

Go down

How to Calculate the Future Value of an Investment

Post by nihal123 on Mon Nov 20, 2017 10:18 pm

Investments may be spaced over time -- a monthly addition to your 401K, for example -- or may be a single, lump sum investment, such as the purchase of an annuity. In the latter instance, you can calculate your investment's future value using a well-known financial formula called "the future value of a lump sum investment." Below are three different ways of solving the problem. Each method uses a different means of calculation, but the underlying formula is the same in all three instances.


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
avatar
nihal123
Top contributor
Top contributor

Posts : 4623
Join date : 2014-02-24
Age : 52
Location : Waga

Back to top Go down

Re: How to Calculate the Future Value of an Investment

Post by Ethical Trader on Wed Nov 22, 2017 11:46 am

Thanks Nihal. Expect more of these from you.
avatar
Ethical Trader
Top contributor
Top contributor

Posts : 3978
Join date : 2014-02-28

Back to top Go down

Back to top


 
Permissions in this forum:
You cannot reply to topics in this forum