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

Display results as :
 


Rechercher Advanced Search

Latest topics
» First capital holdings
How to Calculate the Future Value of an Investment EmptyToday at 12:33 am by pathfinder

» Thread for News on CSE and SL Economy
How to Calculate the Future Value of an Investment EmptyYesterday at 7:02 pm by NIRMALSG

» Happy Father's Day !
How to Calculate the Future Value of an Investment EmptyMon Jun 17, 2019 8:58 pm by spw19721

» Dividend Announcement
How to Calculate the Future Value of an Investment EmptyMon Jun 17, 2019 6:57 pm by chutiputha

» Cricket !
How to Calculate the Future Value of an Investment EmptyMon Jun 17, 2019 8:20 am by කිත්සිරි ද සිල්වා

» DPL.N0000 (Dankotuwa Porcelain PLC)
How to Calculate the Future Value of an Investment EmptySun Jun 16, 2019 7:12 am by NIRMALSG

» Re: Financial reports Q1-2019
How to Calculate the Future Value of an Investment EmptyFri Jun 14, 2019 8:57 pm by dhanurrox

» SAMP.N0000 (SAMPATH BANK PLC)
How to Calculate the Future Value of an Investment EmptyFri Jun 14, 2019 8:11 am by puliyanam

» SEYB.N0000 ( SEYLAN BANK PLC )
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 8:11 pm by ruwan326

» NTB.N0000 (NATIONS TRUST BANK PLC)
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 8:08 pm by ruwan326

» PABC.N0000 (Pan Asia Banking Corporation PLC)
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 8:06 pm by ruwan326

» NDB.N0000 (NATIONAL DEVELOPMENT BANK PLC)
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 7:58 pm by ruwan326

» HNB.N0000 ( Hatton National Bank PLC)
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 7:57 pm by ruwan326

» HDFC.N0000 (HOUSING DEVELOPMENT FINANCE CORPORATION BANK OF SRI LANKA)
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 7:48 pm by ruwan326

» DFCC.N0000 ( DFCC BANK PLC )
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 7:45 pm by ruwan326

» COMB.N0000 ( COMMERCIAL BANK OF CEYLON PLC )
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 7:43 pm by ruwan326

» මිල සූත්‍රය වැරදුණාද, වැරැද්දුවාද?
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 9:21 am by ruwan326

» අනං මනං! #/+?.<>
How to Calculate the Future Value of an Investment EmptyThu Jun 13, 2019 8:07 am by ruwan326

» Should CSE be like this? Whose FAULT is it?
How to Calculate the Future Value of an Investment EmptyWed Jun 12, 2019 5:21 pm by Yin-Yang

» CCS.N0000 ( Ceylon Cold Stores)
How to Calculate the Future Value of an Investment EmptyTue Jun 11, 2019 9:15 pm by ruwan326

» Access Engineering AEL Technical Analysis
How to Calculate the Future Value of an Investment EmptyTue Jun 11, 2019 9:10 am by Jimmy

» DOCK.N0000 (COLOMBO DOCKYARD PLC)
How to Calculate the Future Value of an Investment EmptyMon Jun 10, 2019 11:13 pm by hammurabi

» MCPL.N0000
How to Calculate the Future Value of an Investment EmptySun Jun 09, 2019 12:15 pm by ruwan326

» Tourism sector
How to Calculate the Future Value of an Investment EmptySun Jun 09, 2019 6:53 am by NIRMALSG

» LOFC Initiating Coverage - STRONG BUY - 29 03 17 - FC Research
How to Calculate the Future Value of an Investment EmptyFri Jun 07, 2019 5:42 am by stockback

» Easter Sunday Attack and Sri Lanka
How to Calculate the Future Value of an Investment EmptyThu Jun 06, 2019 9:13 am by ruwan326

» In the Meantime, Within Our Shores !
How to Calculate the Future Value of an Investment EmptyMon Jun 03, 2019 2:14 pm by කිත්සිරි ද සිල්වා

» What to Analyse
How to Calculate the Future Value of an Investment EmptySun Jun 02, 2019 7:11 am by Leon

» Tolerance at its Best !
How to Calculate the Future Value of an Investment EmptyThu May 30, 2019 10:50 am by Yin-Yang

» විශ‍්‍රාම ගැන්වීමේ වයස් සීමාව ඉහළ දැමීමට මහ බැංකුවෙන් යෝජනාවක්
How to Calculate the Future Value of an Investment EmptyTue May 28, 2019 8:03 am by කිත්සිරි ද සිල්වා

» සදහම් අටුවාව
How to Calculate the Future Value of an Investment EmptyTue May 28, 2019 7:07 am by ruwan326

» TPL.N0000 (TALAWAKALE PLANTATIONS )
How to Calculate the Future Value of an Investment EmptyMon May 27, 2019 8:04 am by yellow knife

» බැරි වෙලා වත් අනික් පැත්ත උනොත්...?
How to Calculate the Future Value of an Investment EmptyFri May 24, 2019 3:42 pm by smallville

» Sri Lanka at Cross Roads: Time to Learn, Unlearn and Relearn - Prof Rohan Gunaratna
How to Calculate the Future Value of an Investment EmptyFri May 24, 2019 3:10 pm by puliyanam

» Songs to listen
How to Calculate the Future Value of an Investment EmptyFri May 24, 2019 11:26 am by yellow knife

» Dhammika Perera non-committal on common candidate speculation
How to Calculate the Future Value of an Investment EmptyThu May 23, 2019 2:54 pm by කිත්සිරි ද සිල්වා

» Films - To Watch List
How to Calculate the Future Value of an Investment EmptyWed May 22, 2019 10:04 am by කිත්සිරි ද සිල්වා

» Japan, India in Deal at ‘Belt And Road’ Colombo Port: Nikkei
How to Calculate the Future Value of an Investment EmptyTue May 21, 2019 2:06 pm by Ethical Trader

» Presidential poll between 15 Nov-7 Dec
How to Calculate the Future Value of an Investment EmptyTue May 21, 2019 11:31 am by bjmd

» Flying is the Safest mode of Transport
How to Calculate the Future Value of an Investment EmptyTue May 21, 2019 7:07 am by කිත්සිරි ද සිල්වා

» My Port Folio Bleeding But Its just the Begining Of..
How to Calculate the Future Value of an Investment EmptySat May 18, 2019 7:40 pm by serene

» Sri Lanka mulls 25-pct ownership limit in finance companies
How to Calculate the Future Value of an Investment EmptyFri May 17, 2019 3:40 pm by Backstage

» Searing Heat in China Is Causing Havoc for Rubber Makers
How to Calculate the Future Value of an Investment EmptyFri May 17, 2019 2:43 pm by Backstage

» Israeli spyware breached WhatsApp security
How to Calculate the Future Value of an Investment EmptyWed May 15, 2019 7:47 am by කිත්සිරි ද සිල්වා

» Is Burka prohibted ?
How to Calculate the Future Value of an Investment EmptyWed May 15, 2019 7:30 am by කිත්සිරි ද සිල්වා

» Thread for General News Local/Foreign
How to Calculate the Future Value of an Investment EmptyTue May 14, 2019 11:49 am by CK

» Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?
How to Calculate the Future Value of an Investment EmptyFri May 10, 2019 7:15 pm by Backstage

» NEST.N0000
How to Calculate the Future Value of an Investment EmptyThu May 09, 2019 7:54 pm by ruwan326

» Sweden-based Tundra Fund says Colombo bourse at lowest levels since 2009
How to Calculate the Future Value of an Investment EmptyWed May 08, 2019 5:43 pm by serene

» Telenor and Dialog Axiata's parent in talks to merge Asian businesses
How to Calculate the Future Value of an Investment EmptyMon May 06, 2019 1:50 pm by Backstage

June 2019
SunMonTueWedThuFriSat
      1
2345678
9101112131415
16171819202122
23242526272829
30      

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 Empty 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
nihal123
nihal123
Top contributor
Top contributor

Posts : 5551
Join date : 2014-02-24
Age : 53
Location : Waga

Back to top Go down

How to Calculate the Future Value of an Investment Empty 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.
Ethical Trader
Ethical Trader
Top contributor
Top contributor

Posts : 5255
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