Future value

Future value is the amount that an asset will be worth as of a future date, based on an assumed growth rate. The calculation assumes that a fixed amount of cash is made available for investment at the start date, and that it grows at a steady rate until the designated future date. The concept is used to estimate the return on different types of investments. The future value calculation works well for investments that have a fixed return, such as bonds. However, its results may be wildly inaccurate for other investments whose returns can vary over time, such as equity securities. A further concern is that it does not account for inflation; thus, what appears to be a significant future value might actually turn out to be a negative return if the inflation rate during the intervening years is high.

Related Courses

Excel Formulas and Functions
Financial Analysis
Introduction to Excel