How Does The Future Value Of Money Calculator Work?
The Future Value of Money Calculator is a tool designed to assist you in determining the change in the value of your money, should you choose to deposit it in a bank. Within the calculator, you can mention the duration for calculation of interest, the starting amount, and the interest rate. Besides, should you deposit an additional amount of money periodically, you can specify that amount, which offers you a great deal of flexibility. Further, you can choose when to make this periodic payment, either at the beginning or the end of the period.
How To Calculate The Future Value Of Money With Interest?
If you are only interested in finding the change in the value of your money after a stipulated period, all you have to do is fill in the number of periods, the starting amount and the interest rate. The calculator takes care of the rest.
For example, let us assume that Jonathan needs to find out which bank will offer him a more significant return. For the sake of clarity, Jonathan has $1000 in Bank A and $1300 in bank B. Bank A provides an interest rate of 10%, while Bank B provides customers with a rate of 5% for their deposits. He deposits the money and waits for six years to see which bank offers him better returns. Entering these values into the calculator and clicking calculate will present you with a detailed list of results. This list is a breakdown of the new amount into how much is the starting amount, and how much is the earning from interest. Further, a table depicting the schedule of payments gives one a better picture of how interest is determined.
You will find that the first amount has increased by $771.56 to $1771.56, while the second one has increased by $442.12 to $1742.12. Despite starting with a lower amount, Bank A manages to offer better returns than its peer by its higher interest rate. Scenarios like these are commonplace today, which means that the Future Value Of Money Calculator is sure to come in handy.
How To Calculate The Future Value Of Money With Interest And Periodic Deposits?
When it comes to determining the future value of money, the scenario seems simple enough when only the starting amount and the interest rate are the factors taken into consideration. But what if one makes periodic deposits? And what if these payments are at the beginning of each period or the end of it?
To tackle these conditions and circumstances, the Future Value of Money Calculator presents you with the option of adding a periodic deposit. Further, it also lets you pick when to make the payment. The payment can be made either at the beginning of each period or at the end of each period. The calculator handles the heavy lifting for you and presents a neat list of results. The breakdown also mentions the amount earned just by periodic deposits alone, giving you further insights into the way your bank works.
To keep things simple, let’s consider the previous scenario. Taking only Bank A into consideration, Jonathan decides to deposit $10 every year for those six years with a starting amount of $1000. The 10% interest rate will now act on the periodic deposits as well, boosting earnings. Adding these values to the calculator gives us the future value of Jonathan’s earnings, $1856.43. But this is when the periodic payments are made at the start of each period. Should you choose to add this amount at the end of each period, the value changes to $1848.72. The value can be of your choosing, and it can also be the amount you invest in savings.