Future Value

Future value

The amount of cash at a specified date in the future that is equivalent in value to a specified sum today.

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Future Value

The value of an asset or investment at a certain point in the future when its return is a known factor. That is, the future value of an investment is useful only when the security being measured has a fixed rate of return. Stocks are highly unlikely to be measured for future value because their returns are too volatile. The future value is used for bonds, interest-bearing accounts, certificates of deposit, and other, similar assets.

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future value

The amount to which a specific sum or series of sums will grow on a given date in the future. The sums are assumed to earn an annual return that is related to the market rate of interest. For example, $1,000 has a future value of $1,120 in one year, assuming an annual return of 12%. Compare present value.

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Future Value (FV)

What Does Future Value (FV) Mean?

The future value of an asset or cash expressed in terms of its equivalent value to a specified sum today. There are two ways to calculate FV: (1) for an asset with simple annual interest = Original Investment × (1+ (Interest Rate × Number of Years)); (2) for an asset with interest compounded annually = Original Investment × ((1 + Interest Rate) ^ Number of Years).

Investopedia explains Future Value (FV)

Consider the following examples: (1) $1,000 invested for 5 years with simple annual interest of 10% would have a future value of $1,500.00; (2) $1,000 invested for 5 years at 10%, compounded annually has a future value of $1,610.51.

Related Terms:
• Compounding
• Discount Rate
• Inflation
• Present Value
• Time Value of Money