Future Value of a Single Amount
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The future value of a single amount (one time cash flow) at some future time evaluated at a given interest rate assuming that compounding take place one time in a year (annually). Two methods for calculation:
Formula Future Value of a Single Amount
FVn = Future value of n years
PV = Present value
i = Interest rate or Compound rate
n = Number of years
FVIF = Future Value Interest Factor
Example # 1:
Ms Nosheen puts Rs. 10,000 in a savings account today, that pays 5% compounded annually. How much will she have in her account after ten years; by above mentioned three equations?
Solution:
Future Value of Single Amount Table Download
Example # 2:
Find the value of Rs. 10,000 today at the end of 10 periods at 5% per period by using scientific calculator and by Excel sheet?
Solution:
>> Practice Future Value of a Single Amount MCQs
Future value of a single amount (Intra-year Compounding)
The value of a single amount at some future time evaluated at a given interest rate assuming that compounding take place more than one time in a year (Intra-year). Interest rate reduced while periods of time increase by frequency of compounding (m) i.e. i/m and n*m. Two methods for calculation:
Formula
Time Value of Money Formula Sheet Download
FVn = Future value of n years
PV = Present value
i = Interest rate or Compound rate
m = Frequency of compounding
n = Number of years
FVIF = Future Value Interest Factor
>>> Practice Future Value of a Single Amount MCQs
Example # 3:
Mr. Naveed purchase a 3-year, 6-percent savings certificate for Rs. 25,000. If interest is compounded semi-annually, what will be the value of the certificate when it matures by above mentioned two equations?
Solution:
Future Value of Single Amount Table Download
>> Practice Future Value of a Single Amount Quiz 1 and Quiz 2.
References
Financial Management: Theory and Practice, Dr Eugene F Brigham & C Micheal Ehrhardt
Fundamentals of Financial Management: Concise Edition, Brigham Houston
The Economist Guide to Financial Management, John Tennet
Financial Management: Core Concepts, Raymond M Brooks
Thank you so much
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