Q: What is future value and compound interest?

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At 2% compound interest, it will be 134,586.83 dollars - at today's prices. What inflation will do its real value is anyone's guess.

The formula for compound interest is FV = PV * (1 + i) ^ t Where FV = Future Value PV = Present Value t = time i = interest rate As an example, suppose you have $100 now, the interest rate is 5%, and the time is 4 years. The future value is then FV = $100 * (1 + 0.05) ^ 4 = $100 * (1.05)^4 = $100 * 1.21550625 =~ $121.55 After four years, you will have $121.55. Note the answer has been rounded to the nearest cent.

The present value of future cash flows is inversely related to the interest rate.

The Present Value Interest Factor PVIF is used to find the present value of future payments, by discounting them at some specific rate. It decreases the amount. It is always less than oneBut, the Future Value Interest Factor FVIF is used to find the future value of present amounts. It increases the present amount. It is always greater than one.

Compound interest increases the amount earned by adding credited interest to the principal, and interest will then be earned on that money as well. The longer the principal and interest remain in the account, the greater the earnings they will accrue.

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Increases

Future value Present value Compound or simple interest Amortization/Depreciation

At 2% compound interest, it will be 134,586.83 dollars - at today's prices. What inflation will do its real value is anyone's guess.

Compounding finds the future value of a present value using a compound interest rate. Discounting finds the present value of some future value, using a discount rate. They are inverse relationships. This is perhaps best illustrated by demonstrating that a present value of some future sum is the amount which, if compounded using the same interest rate and time period, results in a future value of the very same amount.

The formula for compound interest is FV = PV * (1 + i) ^ t Where FV = Future Value PV = Present Value t = time i = interest rate As an example, suppose you have $100 now, the interest rate is 5%, and the time is 4 years. The future value is then FV = $100 * (1 + 0.05) ^ 4 = $100 * (1.05)^4 = $100 * 1.21550625 =~ $121.55 After four years, you will have $121.55. Note the answer has been rounded to the nearest cent.

The present value of future cash flows is inversely related to the interest rate.

1.0

Adding the interest to the original deposit accelerates the deposited value.

What effect do interest rates have on the calculation of future and present value, how does the length of time affect future and present value, how do these two factors correlate.

The Present Value Interest Factor PVIF is used to find the present value of future payments, by discounting them at some specific rate. It decreases the amount. It is always less than oneBut, the Future Value Interest Factor FVIF is used to find the future value of present amounts. It increases the present amount. It is always greater than one.

direct

Simple interest, 500 + (5 x 5 x 4) = 600. Compound 500 x 1.04^5 = 632.66