What is Future Value of money?
The value of money which is presently held at given future date at a given interest rate is called Future value of money. Thus, we can say that,
Future Value of money = Value of the money at present + interest
Students must be familiar with the formulas used to calculate the interest for the aforesaid formula. Our experts ensure that they explain the implementation of formula. Students must prefer online Future Value homework help if they are facing problems in completing their homework.
Different types of interest
To find out the future value of money, one must know how to calculate interest, and for that, we must focus on the types of interest. There are two types of interest, which are-
- Simple interest
- Compound interest
What is Simple interest?
It is an interest which accrues only on the amount borrowed originally. It means no interest is accrued on the interest which is accumulated previously.
Simple interest = money borrowed (P) X Interest rate (r) X Time period (t)
There are two formulas of calculating future value and simple interest together. We can calculate future value of money on simple interest basis by using formula. Prefer Future Value assignment help to know the steps of calculating future value of money.
What is Compound Interest?
It is an interest which not only accrues in the original amount but also on the interest accrued previously. The formula for calculating the same is-
Compound interest (CI) = Future value (FV) – Money borrowed at present (P)
(P) = FV / (1+r) t
Future value = money borrowed (P) X [1 + Interest rate (r)] (t)
What is effective rate of interest?
A rate at which money is help at present actually increases in a year is called effective rate of interest. Often interest is compounded more than once in a particular year, at that situation effective rate of interest is different from rate of interest given.
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- Meaning of sinking fund
- Meaning of perpetuity
- How to use compound value and present value tables
- How to find out compound value factors and present value factors by using calculator
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