Time Value of Money Calculator
The Time Value of Money Calculator is a financial tool designed to help individuals understand the concept of time value of money, which states that a sum of money is worth more today than it will be in the future due to its potential to earn interest. This calculator allows users to calculate the present or future value of a sum of money based on a given interest rate and time period, making it an essential resource for investors, financial planners, and anyone looking to make informed decisions about their money.
Calculate the present or future value of a sum of money based on a given interest rate and time period.
How it Works
The Time Value of Money Calculator uses a simple formula to calculate the present or future value of a sum of money. The formula is based on the concept of compound interest, which takes into account the interest rate and time period to calculate the future value of an investment. The formula is as follows: FV = PV x (1 + r)^n, where FV is the future value, PV is the present value, r is the interest rate, and n is the number of years.
| Present Value (PV) | Interest Rate (r) | Time (n) | Future Value (FV) |
|---|---|---|---|
| $1,000 | 5% | 1 year | $1,050 |
| $1,000 | 5% | 2 years | $1,102.50 |
| $1,000 | 5% | 3 years | $1,157.63 |
Common Use Cases
- Calculating the future value of an investment
- Determining the present value of a future cash flow
- Comparing the returns on different investment opportunities
- Planning for retirement or other long-term financial goals
- Evaluating the effectiveness of a savings plan
- Calculating the interest earned on a savings account
- Determining the amount needed to save for a specific financial goal
- Comparing the costs of different loan options
- Calculating the return on investment (ROI) for a business or project
- Evaluating the impact of inflation on purchasing power