The future-value formula FV=PV(1+r)n is rearranged by dividing both sides by the growth factor (1+r)n. This isolates PV on one side, resulting in the present-value formula PV=(1+r)nFV.
Conditions: The original formula FV=PV(1+r)n holds true.; (1+r)n is not zero (which is true for standard positive interest rates).
The future-value formula FV=PV(1+r)n is rearranged by dividing both sides by the growth factor (1+r)n. This isolates PV on one side, resulting in the present-value formula PV=(1+r)nFV.
Conditions: The original formula FV=PV(1+r)n holds true.; (1+r)n is not zero (which is true for standard positive interest rates).
To calculate the future value (FV) of a lump sum, you use the compound interest formula FV=PV(1+r)n. You substitute the present value (PV), the interest rate per period (r), and the number of periods (n) into the formula.
Conditions: The interest rate r is assumed to remain constant over the period.; The compounding frequency matches the time unit of n (e.g., annual rate with years).; The formula assumes a single lump-sum payment rather than an annuity.
To calculate the future value (FV) of a lump sum, you use the compound interest formula FV=PV(1+r)n. You substitute the present value (PV), the interest rate per period (r), and the number of periods (n) into the formula.
Conditions: The interest rate r is assumed to remain constant over the period.; The compounding frequency matches the time unit of n (e.g., annual rate with years).; The formula assumes a single lump-sum payment rather than an annuity.