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MasterMath

Future Value Calculator

1,000 at 5% compounded monthly becomes 1,647 in ten years, not 1,500. The compounding frequency is what turns a 5% headline rate into an effective 5.12%.

Currency and number format for

Value at the end of the term

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Value at the end of the term—
Interest accumulated—
Effective annual rate—
Your money multiplies by—

How this was worked out

    The formula

    FV = PV × (1 + r ÷ n)^(n × t)

    Where it comes from

    Future value asks what a sum today will be worth later once interest compounds. The headline rate is not the whole story: how often the interest is added back matters, because each addition starts earning interest of its own.

    How to work it out by hand

    1. Divide the annual rate by the number of times it compounds per year
    2. Multiply the years by that same number to get the number of periods
    3. Raise (1 + periodic rate) to the number of periods
    4. Multiply your starting amount by the result

    What is worth knowing

    The effective annual rate is the figure to compare across products, because it folds the compounding frequency into a single number. At 5%, compounding monthly gives 5.12% effective and daily gives 5.13% — the gains from more frequent compounding flatten out fast, and the limit at continuous compounding is only 5.127%. So a bank advertising daily compounding is offering you almost nothing over monthly. What genuinely moves the needle is the rate and the time, in that order at short horizons and the other way round at long ones.

    Frequently asked questions

    Why is it more than principal plus rate times years?

    Because interest earns interest. That is the whole difference between compound and simple, and it grows with every period.

    Does compounding frequency matter much?

    Less than people expect. Going from annual to monthly at 5% gains you about 0.12 percentage points. Going from monthly to daily gains you almost nothing.

    What is the effective annual rate?

    The single annual rate that would produce the same result with one compounding per year. It is the only fair way to compare products with different compounding.

    Does this account for inflation?

    No, this is a nominal figure. To see what it is worth in today's money, run the result through an inflation calculator.