# Future Value (FV)

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## Definition of 'Future Value (FV)'

The future value (FV) of an investment is the amount of money that it will be worth in the future, based on a given interest rate and the number of years that the money is invested. The future value formula is:

```
FV = PV * (1 + r) ^ n
```

where:

* FV is the future value of the investment
* PV is the present value of the investment
* r is the interest rate
* n is the number of years that the money is invested

For example, if you invest \$100 at an interest rate of 5% for 10 years, the future value of your investment will be \$162.89.

The future value of an investment can be used to compare different investment options and to make decisions about how to invest your money. It can also be used to calculate the amount of money that you need to save in order to reach a financial goal, such as retirement or a down payment on a house.

There are a few things to keep in mind when using the future value formula. First, the interest rate used in the formula is an annual rate. This means that if you are investing for a period of less than one year, you will need to divide the interest rate by the number of years in the investment period. Second, the future value formula assumes that the interest rate is compounded annually. This means that the interest earned on the investment is added to the principal at the end of each year and then earns interest in the following year. If the interest rate is compounded more frequently than annually, the future value of the investment will be greater.

The future value of an investment is a valuable tool for financial planning. It can be used to help you make informed decisions about how to invest your money and to reach your financial goals.

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