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Trading and Investment Terminology

Future Value (FV)

Future value (FV) can be defined as the value of a present asset at a future date dependent on an assumed pace of development.

 

The future value is imperative to investors and investment managers as they utilize it to evaluate how much an investment made in the present will be worth after a particular period of time.

 

Realizing the future value empowers investors to settle on sound investment choices dependent on their expected needs.

 

However, external economic variables, for example, inflation, can antagonistically influence the future worth of the asset by dissolving its value.

 

The future value estimation enables investors to anticipate, with shifting degrees of exactness, the measure of benefit that can be produced by various investments.

 

The measure of development produced by holding a given sum in cash will probably be not quite the same as if that equivalent sum were put in securities; so, the future value equation is utilized in order to compare various choices.

 

Deciding the future value of an asset can become complex, based upon the kind of asset.

 

Likewise, the calculation of future value is based upon the assumption of a static growth rate.

 

Future Value = I x ( 1 + ( R x T ) )

 

where:

 

I = Investment Amount

R = Interest Rate

T = Number of years

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