BAII Plus Future Value Calculator
Use this calculator to determine the Future Value (FV) of an investment or series of cash flows, mimicking the Time Value of Money (TVM) functions of a BAII Plus financial calculator.
Understanding the BAII Plus Future Value Calculator
The BAII Plus is a popular financial calculator used by students and professionals for various financial computations, especially those involving the Time Value of Money (TVM). This online calculator emulates one of its core functions: calculating Future Value (FV).
What is Future Value (FV)?
Future Value is the value of a current asset or a series of cash flows at a specified date in the future, based on an assumed growth rate. It helps investors estimate how much an investment made today will be worth in the future, or how much a series of regular payments will accumulate to over time.
Key Inputs Explained:
- Number of Periods (N): This represents the total number of compounding or payment periods. For example, if you have a 5-year investment with monthly compounding, N would be 60 (5 years * 12 months/year).
- Interest Rate per Period (I/Y, %): This is the interest rate applied during each period. It's crucial to match this rate to your period definition. If N is in months, I/Y should be the monthly interest rate. If the annual rate is 6% and compounding is monthly, I/Y would be 0.5% (6%/12). Enter this as a percentage (e.g., 5 for 5%).
- Present Value (PV): This is the current value of a future sum of money or stream of cash flows. It's the initial lump sum investment or the current value of a loan. Enter this as a positive number if it's an investment you're making, or negative if it's a loan you're receiving (though for simplicity, this calculator assumes positive inputs for investments).
- Payment per Period (PMT): This is the amount of each regular payment in an annuity. An annuity is a series of equal payments made at regular intervals. If there are no regular payments, enter 0.
- Payment Timing (End of Period / Beginning of Period):
- End of Period (Ordinary Annuity): Payments are made at the end of each period. This is the most common assumption for loans and bonds.
- Beginning of Period (Annuity Due): Payments are made at the beginning of each period. This is common for rent payments or lease agreements.
How the Calculation Works:
The calculator uses the Time Value of Money (TVM) formulas to project the future worth of your initial investment (PV) and any recurring payments (PMT), considering the compounding interest over the specified number of periods. The formula adjusts based on whether payments are made at the beginning or end of the period. The general formula for Future Value (FV) combines the future value of a lump sum (PV) and the future value of an annuity (PMT).
Example Scenario:
Imagine you invest $5,000 today (PV) and plan to add $100 at the end of each month (PMT) for the next 5 years (N = 60 months). Your investment earns an annual interest rate of 6%, compounded monthly (I/Y = 0.5% per month). What will be the future value of your investment?
- N: 60
- I/Y: 0.5 (for 0.5%)
- PV: 5000
- PMT: 100
- Payment Timing: End of Period
Using the calculator with these inputs, you would find the Future Value (FV) of your investment to be approximately $13,721.25.