Question

The value or amount of Money at some future time

Answer 1

The value or amount of Money at some future time is called Future Value of Money.

The value of money that we have on hand today is called as the present value and the value of amount of money that we will receive at a future date the future value of money.FV or Future Value is simply what money is expected to be worth in the future. Typically, cash in a savings account or a hold in a bond purchase earns compound interest and so has a different value in the future.

FV = PV ( 1 + r/100)^n

FV = Future Value, PV = Present Value, r = rate of interest, n = number of years

Let's assume Tom invested $2000 for 5 years with interest rate of 10% compounded annually.

Solving for future Value

FV = 2000 (1 + 10/100)^5

= 2000 ( 1 + 0.1)^5

= 2000 ( 1.1)^5

= 2000 *. 1.61051

= $3221

So, in future at time of maturity Tom will receive $3221.

The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth in the future. Knowing the future value enables investors to make sound investment decisions based on their anticipated needs.It is an important concept in finance and is used as basis for stock pricing, bond pricing, financial modeling, banking, and insurance, etc.