how to find future value manually and with a financial calculator

This video will teach you how to find the future value for compound interest manually and with a financial calculator.

Hi guys welcome to our video how to find the future value in this video we’re going to learn the formula how to find the future value manually and with a calculator last time here we have the formula for the future value as you can see here previa means the present value i means the interest rate and t is gonna be the time let’s do some problems but before that

Let’s talk about the compound periods when you have compound interest it’s very important you understand this when it’s annually that means that the interest being compound once when it’s semi-annually the interest being compound twice monthly twelve corley for weekly 52 and daily 360 this is going to be used in a little bit but for right now let’s just start

With some examples also the more you compound they hire your future value less time so let’s say that we have a problem like this find the future value of a thousand dollars in four years with a rate of 12 percent compound annually how do we do it manually i just go ahead and follow the formula the present value is a thousand the interest is point twelve remember

When we use this in the calculator we need to do their twelve divided by 100 and this gives me point twelve t is equal to 4 because we have here 4 years now i just plug it in then i’ll elevate first of all you have to do one plus point twelve then you do the elevation and finally you multiply by a thousand you should get this answer 1570 3.52 this is just you

Know an approximation how do i do with a calculator let’s say that you have a financial calculator one of the most common ones is the hp 10 b2 you can use another one and you should the same procedure annie’s gonna be for is going to be 12 the calculator understands that 12 means 12% so you don’t have to put point 12 pv you have to put negative 1,000 the reason

Why you have to do it like this is because the calculator will give you an error if you don’t put the present value with a negative number so every time you use a calculator and you want to plug the present value you have to put a negative in the front the payment is gonna be zero because we’re not making any payments finally the future value should give you one

Thousand five hundred and seventy three was fifty two less or more examples let’s say that now they give me the same problem but now the right is gonna be compound semi-annually well remember at the beginning of the lesson i said i say that when he semi-annually the interest is being compound twice a year that means that m is gonna be equal to two anytime you have

Something compound semi-annually the present value is gonna be the same however the interest you have to divide it by two that’s gonna give me zero point zero six also the time you have to multiply by two because now you don’t have four years or let’s say you don’t have four periods now you’re gonna have a period there for future but is gonna be a thousand times

1 plus 0.06 elevated to the eighth remember you also the parentheses the exponent and then you multiply finally your answer is going to be 1583 with 85 in the calculator you do the same but remember now n is no 4 is 8 that comes from 4 times 2 their rate is not 12 now it’s gonna be 6 12 divided by 2 present value does not change peyman is 0 and your future value

Is gonna be 1593 with 85 this verenor example now we have it quarterly well here what’s gonna happen is that my m is going to be equal to four that means that a year you’re gonna have four periods therefore my present value a thousand but my interest i have to divide it by four so this is actually the amount you’re gonna be using and then your time is that of

Your four periods there’s gonna be 16 peers actually this is a mistake there should be a 16 right here so now i am i calculate i’m sorry my calculator knowing my formula i can put one plus point zero three all that elevated to the 16 times 1000 and that gives me 1604 would 71 cents as you can see here the more you compound the higher your future value is going to

Be so that’s awesome if you ever have to make a deposit in your bank the more you compound the more money you’re gonna get at the end finally in the calculator i do n equals 16 remember that comes with 4 times for i equals 3 that counts by 12 divided by 4 pv is the same payment in zero because we’re not making any payment i’m finally your future value is going to

Be 1604 with 71 to find the future value is very easy you just need to remember that when your company by different periods quarterly it’s gonna be for semi-annually and it’s gonna be equals to 2 monthly 12 and then you know depending whatever you have just put in the calculator and i promise you this is very very easy now i destroy bimonthly what happens now m

Is gonna be goes to 12 again my rate i have to divided by 12 mighty i don’t have four periods now i have 48 periods therefore working this hour again i give them a future writers 1612 with 23 you can see here the the highest future value is the one when i compound monthly like later i’m gonna do the same and equals 48 i was one because remember that’s 12 divided

By 12 which is one pv payment and finally future value is 1612 for 23 i hope you learn a lot

Transcribed from video
how to find future value manually and with a financial calculator By I Hate Math Group Inc