Future value (FV), as the name speaks for itself, is the value on a future specific date.Based on some formulas it is possible to find the present value (PV) of a FV.
Rate of return(r) is an important parameter to depict the FV.The formula is:
FV = PV (1+i) ^n
e.g: Invest Rs 1000 to draw interest for 20 years at 10% compounded annually
FV = 1000 (1.10)^20 = Rs 6727.50
Now if this same was compounding quarterly (every three months) instead of annually then:
FV = 1000 (1.025)^80 = Rs 7209.56
In other words, compounding quarterly gives 7 percent more in the above example.
The power of compounding is substantial.Always opt for compounding with quicker compounding tenure.
Rate of return(r) is an important parameter to depict the FV.The formula is:
FV = PV (1+i) ^n
e.g: Invest Rs 1000 to draw interest for 20 years at 10% compounded annually
FV = 1000 (1.10)^20 = Rs 6727.50
Now if this same was compounding quarterly (every three months) instead of annually then:
FV = 1000 (1.025)^80 = Rs 7209.56
In other words, compounding quarterly gives 7 percent more in the above example.
The power of compounding is substantial.Always opt for compounding with quicker compounding tenure.
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