One of the most commonly used financial functions is the FUTURE VALUE EQUATION which tells the user what their investment’s value will be at a certain point of time at a certain rate.

The FUTURE VALUE EQUATION is:

F=P(1+i)

Where F = the future value of the investment,
P = the present value of the investment, or the amount being initially invested,
and i = the interest rate at which the investment is growing.

For a simple example say that a bank offers a 4% interest rate paid annually for a savings account. In the example you decide to put $100 in this savings account. You are curious how much your $100 will be worth in a year from having been in this savings account so you use the FUTURE VALUE EQUATION to calculate it:

F=100(1+.04)=$104

This is a very simple equation and most real world investments are more complicated. Many savings accounts are compounded, meaning that interest is added to the interest already applied in the account, as this example would be if you chose to leave the $104 in the savings account for another year. There are also other variables to be aware of when calculating future value for varying investments. This also does not factor in the time-value of money.