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Future Value

Using future value tables in Exhibit 1-3 to calculate FV of single deposit or series of deposits

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Future Value

  1. 1. 1-1 Future Value of a Single Deposit Table Example $100 deposited for 10 years at 7% per year Using Table 1-3a: FV = 100 x 1.967 = 196.71
  2. 2. 1-2 Future Value of Series of Deposits “Annuity” : series of equal deposits at equal intervals earning a constant rate • The power of compounding is multiplied – Interest on interest from principal – AND from new contributions • Use FV of a Series to calculate (1-3b): – Annual deposit amount – Table value based on amount of time and interest rate
  3. 3. 1-3 Future Value of a Series of Deposits Jodie Emerson has two children who will start college in 10 years. She plans to set aside $1,500 a year for their college educations during that period, and expects an annual interest rate of 5% on her savings. What amount can she expect to have available when her children start college? Use Future Value of a series (1-3b) to find out: $1,500 x (12.578) = $18, 867

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Using future value tables in Exhibit 1-3 to calculate FV of single deposit or series of deposits

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