2 Dec 2015

# Measuring The Future Value of Investments: Crucial Points To Take Into Account

The future value of an asset, commonly abbreviated as FV, implies the projected amount of value an asset will probably have in the future. For instance, you can estimate what your car will be worth in a period of ten years, or how much your bank account will be worth in a period of one year. So, Can You Predict the Future Value of Your Investments? Yes, all these things can definitely be measured using the future value formula.

The future value formula is absolutely useful when it comes to figuring out, among many other things, your rate of return and the value of your savings account in a given period of time. The formula comes handy if you wish to save some cash in order to accomplish a retirement milestone.

**Future Value (FV) Calculations**

The vast majority of FV calculations are just functions that encompass three key aspects:

– Rate

– Present value

– Time

In a nutshell—all the calculations with reference to future value involve determining the amount of revenue an investment generates over a given period of time, say a period of 10 years. Similarly, it takes into account the interest rate provided by that specific investment.

Among the most frequently used FV equations in corporate finance include interest rates. You can also apply the same calculations in determining the overall cost of debt for a corporation. It’s a pretty simple formula that lets you get a rough idea of the total value of your future wealth.

**Approaches Used**

Typically, there are two clear approaches used to measure or calculate the future value of an asset.

1) If you’re dealing with an asset comprising simple annual interest, the equation will be as follows:

Simple Annual Interest=Original Investment x (1 + (Interest Rate x number of years))

2) Nonetheless, if you’re dealing with an asset with interest compounded annually, the equation will be as follows:

Original Investment x ((1+interest rate) ^number of years)

**Simple Interest**

Let’s take a look at the following simple equation:

FV=PV (I + rt)

Does it make any sense to you? Well, it simply implies that for an asset that earns a fixed interest rate, its future value (FV) will be worth the present value (ordinarily abbreviated as PV) multiplied by the function of time duration (t) and interest rate (r) plus 1.

**Example:**

For instance, say you acquired your investment for 100 dollars that generates 1% interest rate each year and you hold the purported investment for a period of 10 years. What will be the future value (FV) of your investment?

**Solution**

Future Value (FV) = $100(1+0.01 x 10)

FV=$100(1.1)

Therefore, FV=$110.

You get 0.01 in this example, when you multiply the time and rate in the equation. Correspondingly, you get $10 when you multiply this value (0.01) by the present value (PV) of $100. Thus, the answer to the above question brings the total amount of increase that the interest earns in a period of 10 years.

**Compound Interest**

Compound interest is relatively similar to simple interest, but the only notable difference is that accounts that earn compound interest produce interest on the interest achieved, rather than involving the principal balance.

While this difference can add some sense of complexity to the equation when measuring the future value of an asset that earns compound interest, keep in mind that the basic components are just similar. The formula for deriving the compound interest of an investment is as follows: FV = PV [(1 + r)t]

12 Nov 2016

## Mortgage Refinancing

Refinancing your mortgage is a difficult task especially if it is your first time. It involves a number of financial terms and procedures that you may have never come across, especially if you are not familiar with law and finance. Adding to that, lack of time at your hands may affect you in learning these financial terms and policies.. That is why refinance mortgage brokers are there for help. They will undertake the whole process and all procedures under the contract and carry out the duty on your behalf. Only thing you need to do, is to choose the right broker.

A refinance mortgage broker is one that fully handles the refinance mortgage industry and has many familiarity within the refinance lending companies. Therefore, it is easier to get them to find refinance mortgage lenders for you and communicate your requirement and find out the possible solutions. It is the duty of a refinance mortgage broker to identify and find you the best refinance mortgage lender as per your specifications. Their ability is your key to success.

He/she should be able to advertise you to the refinance mortgage lending companies and complete the application form provided by the refinance mortgage lenders. This saves a lot of time and effort on your part. The broker of course, would have completed the task a thousand previous times and therefore will be well experienced in the process and lingo. The most important tip to any borrower is to use your refinance mortgage agent to get as much information and advice as possible on your monthly payment plans and finance needs. That is actually why pay him for.

## Refinance mortgage lender

When you talk to a refinance mortgage lender, you will notice that they speak in their own language which may blow you off in communication, since you don’t have the knowledge that is need for understanding financial terms and clauses. The advantage of hiring a refinance mortgage broker is that he/she will “decipher” this financial lingo into terms that you are familiar of. Their job is to make you understand the full concept of the mortgage that you are applying for.

Before choosing your broker, it is essentially important to run background checks on lenders, but it is also important to run background checks on the refinance mortgage brokers. Settle for someone trust worthy and reputed in what they do, for hiring a refinance mortgage broker means laying your full credit history in their hands. Hence, before signing into agreement with a refinance mortgage broker, ask him or her for client references.

This is the best possible way of determining the quality of the broker.Do not get crossed in case that the broker speaks fluently in his financial lingo. It is definitely important that he understands the words and terminology, but it is more important that he is capable of conducting this process and finalizing the deal. If this is not the case, you should not choose this broker due to possible problems.

By:Laura CampbellCategory:Mortgage Refinancing, Wealth Management