Future Value of $99084 in 6 Years

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 13, 2024

Future Value Calculation

The future value (FV) of an investment is calculated using a formula that takes into account the present value (PV), interest rate (r), and number of periods (n). The formula is represented as follows:

FV = PV * (1 + r)^n

For our scenario:

  • PV = $99,084
  • Interest rate (r) = Assumed rate or provided rate
  • Number of periods (n) = 6 years

Assumptions and Factors

Several factors influence the calculation of future value:

  • Assumed Interest Rate: The interest rate used significantly impacts the future value. It may be a fixed rate or variable depending on the investment.
  • Time Period: The duration for which the investment is held affects the growth potential.
  • Compounding Frequency: Compounding refers to the frequency at which interest is calculated and added to the principal, influencing the final future value.

Interpretation and Analysis

Understanding the future value involves interpreting the calculated figure and analyzing its implications:

  • Future Value Interpretation: The calculated future value provides insights into the growth potential of the investment. It signifies the expected value of the investment at the end of the specified period.
  • Sensitivity Analysis: Analyzing the sensitivity of future value to changes in interest rates, time periods, and compounding frequencies allows for a better understanding of the investment's dynamics and risk factors.

Application and Examples

The concept of future value finds application in various real-life scenarios:

  • Financial Planning: Determining future values aids individuals in setting long-term financial goals and planning for retirement.
  • Investment Strategies: Investors use future value calculations to compare investment options and select the most suitable ones based on growth potential.
  • Loan Planning: Lenders use future value calculations to assess the repayment capacity of borrowers and determine loan terms.

Conclusion

Understanding the future value of an investment is crucial for making informed financial decisions.

By comprehending the factors influencing future value calculation and analyzing its implications, individuals can effectively plan their finances and optimize investment strategies for long-term growth.

Whether it's planning for retirement, selecting investment opportunities, or evaluating loan options, the concept of future value serves as a valuable tool in the realm of finance.


About the Author

True Tamplin, BSc, CEPF®

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True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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