Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. Future value is calculated in one of two ways depending on whether or not the calculation uses simple or compound interest.
For simple interest the formula is:
Future Value = Current Value x (1 + (interest rate x number of years)
With an investment worth $100 and a 7% interest rate, what will the future value be in 10 years?Â Using the formula, the answer is:
100 * (1+ (.07 x 10) = $170
The compounding future interest formula is:
Future Value = Current Value x ((1 + interest rate) ^ number of years))
Using the same $100 and 7% interest rate, but compounding annually this time, the future value is:
100 * ((1+.07)^10)) = $196.72
The compounding formula always generates a higher amount than the simple interest calculation.Â This is because with compounding, each yearâ€™s earned interest is added to the original amount, and thus increases the amount against which interest is calculated in subsequent years.
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In This Series

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Dissecting the Simple Interest Formula
Simple interest ignores the effect of compounding: it's only calculated on the principal amount. This makes it easier to calculate than compound interest. 
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Learn Simple and Compound Interest
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Accelerating Returns With Continuous Compounding
Investopedia explains the natural log and exponential functions used to calculate this value. 
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4 Ways Simple Interest Is Used In Real Life
Simple interest works in your favor when you're a borrower, but against you when you're an investor. 
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How Interest Rates Work on Savings Accounts
Here's what you need to know to grow your rainyday fund. 
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Understanding the Time Value of Money
Find out why time really is money by learning to calculate present and future value. 
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Explaining Interest
Interest is the price charged to borrow money, and is typically expressed as a percentage of the principal, or the amount loaned. 
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The Effective Annual Interest Rate
The effective annual interest rate is a way of restating the annual interest rate so that it takes into account the effects of compounding. 
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Simple Interest Loans: Do They Exist?
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Investing
Overcoming Compounding's Dark Side
Understanding how money is made and lost over time can help you improve your returns.