Formula and what it assumes
Future value rolls a present amount forward at a constant rate per period. With a starting balance PV, a level payment PMT, a rate i per period and n periods, the balance is PV × (1 + i)^n plus PMT × [(1 + i)^n − 1] ÷ i. These are the standard time value of money formulas found in any intermediate accounting or corporate finance text. The calculator rolls the balance period by period as well and the yearly table ties to the formula total.
When to use it
Use it to recompute a balance the client reports from its terms: a sinking fund, a scheduled savings or deferred compensation deposit stream, or a lump sum invested at a stated rate. It also answers planning questions from client finance teams, such as what a monthly set-aside grows to by a loan maturity date. For the reverse question, the present value of a stream of payments, use the loan amortization calculator or the NPV and IRR calculator.
Limits
The rate is constant and payments are level and made once per compounding period. Variable rates, irregular deposits, fees, taxes and mid-period timing are not modeled. The number of periods is rounded to a whole number. Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is the future value formula?
For a lump sum, FV = PV × (1 + i)^n, where i is the rate per compounding period and n is the number of periods. For level payments at the end of each period, FV = PMT × [(1 + i)^n − 1] ÷ i. An annuity due pays at the start of each period, so its value is the ordinary annuity result multiplied by (1 + i).
What is the difference between an ordinary annuity and an annuity due?
An ordinary annuity pays at the end of each period and an annuity due pays at the start. Each due payment earns one more period of interest, so the future value of an annuity due is higher by a factor of (1 + i). Check the contract or plan document for the payment date before choosing.
How is the rate per period set?
Divide the nominal annual rate by the number of compounding periods per year. A 6% nominal rate compounded monthly is 0.5% per month, which gives an effective annual rate of about 6.17%. This tool assumes one payment per compounding period.
What happens at a zero or negative rate?
At a rate of zero the payment factor is simply the number of periods, so the future value is the starting balance plus all payments. A negative rate shrinks the balance each period. A rate per period of -100% or lower is rejected because a balance cannot lose more than all of its value.
How would an auditor use a future value calculation?
To recompute a balance the client reports, such as a sinking fund, a deferred compensation account or a savings plan with scheduled deposits, and to see whether the reported amount is consistent with the stated rate and contributions. It is a recomputation aid and does not by itself support a conclusion about an account.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.