P = present value
i = interest rate per period
n = number of interest periods
The accumulated value of an amount of present value 1 today with interest rate 10% in a 10 years period can be expressed as
Year | Accumulated Value |
---|---|
0 | 1 |
1 | 1.1 |
2 | 1.21 |
3 | 1.33 |
4 | 1.46 |
5 | 1.61 |
6 | 1.77 |
7 | 1.94 |
8 | 2.14 |
9 | 2.36 |
10 | 2.59 |
An amount of 500 will accumulate with the factor 2.14 in 8 years - or
F = 2.14 (500)
= 1070
This calculated table visualizes the increase in future value of present money due to interest rate and time.
Present Value of Money
Start Year
End Year
Max. Interest Rate (%)
Download and print Future Value of Present Payment chart
P - Present value
i - interest rate per period (%)
n - number of periods
If a single payment P shall produce a future value F after n annual compounding periods, the per annum decimal interest rate can be calculated as
i = (F / P)1/n - 1 (2)
A single payment of 100 today shall grow to 120 in 5 years. The required interest rate can be calculated as
i = (120 / 100)1/5 - 1
= 0.037
= 3.7 %
Engineering economics - cash flow diagrams, present value, discount rates, internal rates of return - IRR, income taxes, inflation.
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