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Future
value is the value in the future of a known amount
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today
with a stated investment interest rate r for a period of n
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FV=Today $ * [(1+r)n]
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An
example
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If
you invest $1,000 for 20 years at r=5%, how much will you have in
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your
account?
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Answer: FV = $1,000*[(1+5%)20]=$2,653
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You
can also use Table A.1 on page 446 in the textbook. Note 5% for
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20
years has a future value of 2.6533. That means investing $1 for 20
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years
at 5% interest rate will become $2.65 (called the future value).
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Then
the future value of investing $1,000 for 20 years is
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2.6533*1,000=$2,653.
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