Future Value Template

Prepared by Dheeraj Vaidya, CFA, FRM

dheeraj@wallstreetmojo.com

visit - www.wallstreetmojo.com
Example - 1 If Mrs. Smith has $9,000 in her bank account and she earns an annual interest of 4.5%. With the help of the f

Present Value 9000

Interest Rate 4.5%
Number of Periods 15 years

Future Value (FV) 17417.54

Example - 2 Mrs. Smith has another account which has $20,000 paying an annual rate of 11% compounded on a quarterly
Since January 1, 2017, the terms of the agreement have been renewed and the compounded interest is attrib
Mrs. Smith wants to compute the total value of the account on December 31, 2017?

We firstly need to arrive at the opening balance as on January 1, 2017:

PV (Jan’16 – Dec’16) 20000

Compounding period (n) 4
Annual interest rate (r) 11%

Quarterly Interest 2.75%

Future value (This is the opening balance as of January 1, 2017) 22292.425

Thus, now for computing the Future value as of 31st December, 2017, the Present value if $22,292.43.

Since the compound interest is now twice a month

Compounding period (n) now is =2*12 24
Annual interest ('r') which converts monthly interest rate =0.11/12 0.0092
this will further be split twice a month 0.46%

Future Value (FV) =22292.43*(1+0.0046)^24

Future Value (FV) [Value of the account as on December 31, 2017] 24888
. With the help of the future formula, her account after 15 years will be:

=C5*(1+C6)^C7

pounded on a quarterly basis.

ounded interest is attributed twice a month.

=C19/C18

e if $22,292.43.

*(1+0.0046)^24