Calculate the future value of your investments with compound interest
The concept of future value is related to time value of money. For example, if you deposit your money in a bank as a savings account or a fixed deposit account for a certain period of time, you will earn a certain amount of money based on the compound interest computed periodically, and this amount is added to the principal if you continue to keep the money in the bank. Interest for the following period is now computed based on the initial principal plus the interest (the amount which becomes your new principal). Subsequent interests are computed in the same way.
For example, let's say you deposited $1000 in a bank and the bank is paying you 5% compound interest annually. After the first year, you will earn an interest of $1000×0.05=$50. Your new principal will be $1000+$1000×0.05=$1000(1+0.05)=$1000(1.05)=$1050.
After the second year, your new principal is $1000(1.05)×1.05=$1000(1.05)2 =$1102.50. This new principal is called the future value.
Following the above calculation, the future value after n years will be:
FV = PV × (1 + i / 100)n
Where:
Public Function FV(PV As Variant, i As Variant, n As Variant) As Variant ' Formula to calculate Future Value (FV) ' PV denotes Present Value FV = PV * (1 + i / 100) ^ n End Function Private Sub compute_Click() ' This procedure will calculate Future Value Dim FutureVal As Currency Dim PresentVal As Currency Dim interest As Variant Dim period As Variant ' Get user input PresentVal = PV.Text interest = rate.Text period = years.Text ' Calculate Future Value FutureVal = FV(PresentVal, interest, period) ' Format and display result Label5.Caption = Format(FutureVal, "currency") End Sub Private Sub Form_Load() ' Initialize default values PV.Text = "1000" rate.Text = "5" years.Text = "5" End Sub
This VB6 code demonstrates the implementation of a Future Value calculator with a simple form containing text boxes for input and a label for displaying the result.
Public Class FVCalculator Private Function CalculateFV(pv As Decimal, rate As Decimal, periods As Integer) As Decimal ' Calculate future value using compound interest formula Return pv * Math.Pow(1 + (rate / 100), periods) End Function Private Sub btnCalculate_Click(sender As Object, e As EventArgs) Handles btnCalculate.Click Try ' Get input values Dim presentValue As Decimal = Decimal.Parse(txtPresentValue.Text) Dim interestRate As Decimal = Decimal.Parse(txtInterestRate.Text) Dim numPeriods As Integer = Integer.Parse(txtPeriods.Text) ' Calculate future value Dim futureValue As Decimal = CalculateFV(presentValue, interestRate, numPeriods) ' Display result with formatting lblResult.Text = futureValue.ToString("C2") ' Calculate total interest earned Dim totalInterest As Decimal = futureValue - presentValue lblInterest.Text = totalInterest.ToString("C2") Catch ex As Exception MessageBox.Show("Please enter valid numeric values", "Input Error", MessageBoxButtons.OK, MessageBoxIcon.Error) End Try End Sub Private Sub FVCalculator_Load(sender As Object, e As EventArgs) Handles MyBase.Load ' Set default values txtPresentValue.Text = "1000" txtInterestRate.Text = "5" txtPeriods.Text = "5" End Sub End Class
This VB.NET implementation includes error handling and more robust data processing. It demonstrates modern practices like using the Decimal type for financial calculations and Try-Catch blocks for error handling.
function calculateFV() { // Get input values const pv = parseFloat(document.getElementById('presentValue').value); const rate = parseFloat(document.getElementById('interestRate').value); const periods = parseInt(document.getElementById('periods').value); // Validate inputs if (isNaN(pv) || isNaN(rate) || isNaN(periods) || pv <= 0 || rate <= 0 || periods <= 0) { alert('Please enter valid positive numbers for all fields'); return; } // Calculate future value const fv = pv * Math.pow(1 + (rate / 100), periods); const interest = fv - pv; // Format and display results document.getElementById('resultPV').textContent = formatCurrency(pv); document.getElementById('resultRate').textContent = rate + '%'; document.getElementById('resultPeriods').textContent = periods; document.getElementById('resultFV').textContent = formatCurrency(fv); document.getElementById('resultInterest').textContent = formatCurrency(interest); // Show result container document.getElementById('resultContainer').style.display = 'block'; // Generate growth chart generateGrowthChart(pv, rate, periods); } function formatCurrency(value) { return '$' + value.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,'); } function generateGrowthChart(pv, rate, periods) { const canvas = document.getElementById('growthChart'); const ctx = canvas.getContext('2d'); // Clear previous chart ctx.clearRect(0, 0, canvas.width, canvas.height); // Calculate data points const dataPoints = []; for (let i = 0; i <= periods; i++) { dataPoints.push(pv * Math.pow(1 + (rate / 100), i)); } // Draw chart const maxValue = Math.max(...dataPoints); const chartHeight = canvas.height - 40; const chartWidth = canvas.width - 60; const barWidth = chartWidth / periods; // Draw axes ctx.strokeStyle = '#333'; ctx.lineWidth = 1; ctx.beginPath(); ctx.moveTo(40, 20); ctx.lineTo(40, chartHeight); ctx.lineTo(canvas.width - 20, chartHeight); ctx.stroke(); // Draw bars and labels ctx.fillStyle = '#5c6bc0'; ctx.font = '12px Poppins'; ctx.textAlign = 'center'; for (let i = 0; i < dataPoints.length; i++) { const barHeight = (dataPoints[i] / maxValue) * (chartHeight - 30); const x = 40 + (i * barWidth) + (barWidth / 2); const y = chartHeight - barHeight; // Draw bar ctx.fillRect(x - (barWidth * 0.8 / 2), y, barWidth * 0.8, barHeight); // Draw value label ctx.fillStyle = '#333'; ctx.fillText('Y' + i, x, chartHeight + 20); // Draw value at top if (i > 0) { ctx.fillText(formatCurrency(dataPoints[i]), x, y - 5); } ctx.fillStyle = '#5c6bc0'; } // Draw chart title ctx.fillStyle = '#333'; ctx.font = 'bold 14px Poppins'; ctx.textAlign = 'center'; ctx.fillText('Investment Growth Over Time', canvas.width / 2, 15); // Show chart container document.getElementById('chartContainer').style.display = 'block'; } function openTab(evt, tabName) { // Hide all tab contents const tabContents = document.getElementsByClassName("tab-content"); for (let i = 0; i < tabContents.length; i++) { tabContents[i].classList.remove("active"); } // Remove active class from all buttons const tabButtons = document.getElementsByClassName("tab-btn"); for (let i = 0; i < tabButtons.length; i++) { tabButtons[i].classList.remove("active"); } // Show current tab and set button as active document.getElementById(tabName).classList.add("active"); evt.currentTarget.classList.add("active"); }
This JavaScript implementation powers the interactive calculator on this page. It includes input validation, currency formatting, and a visualization of the investment growth over time.
Compound interest is the addition of interest to the principal sum of a loan or deposit, where the interest that has been added also earns interest.
The number of compounding periods greatly affects the total interest earned. More frequent compounding results in higher returns.
Small differences in interest rates can lead to significant differences in future value over long periods.
The initial amount invested is crucial as it forms the base on which all future compounding occurs.
Consider an initial investment of $10,000 with an annual interest rate of 7%:
This demonstrates the power of compounding over longer periods - the investment more than doubles between years 20 and 30.