# Present Value/Future Value

#### Lily House

Thought these little formulas might come in handy for people working on their big plans for the future (especially those without access to excel or fin. calcs)

n
FV = PV * (1 + r)

PV = FV
------------
n
(1 + r)

Where FV = Future Value
PV = Present Value
r = rate of return
n = number of years (or time periods)

Example One:
Say I want to retire in 15 years time with \$1000 p.w. income in todays dollars
Assume an average inflation rate of 3%

15
FV = 1000 * (1.03)
= \$1,558

In other words, would need to aim at earning \$1,558 in 15 years time to have the same purchasing power as \$1,000 today.

Example Two:
I want to accumulate one million dollars in todays dollars.
Again, assume inflation averages 3%

Using the 2nd formula above,
after 10 years you would need \$1,343,916
after 15 years - \$1,557,967
after 20 years - \$1,806,111

Or
One million dollars in 10 years is \$744,094 in todays dollars
15 years is \$641,861
20 years is \$553,676

Hope these formulas come in handy (or at least provide some fun) for one or two of you out there in forum land.

Lily

I've noticed that the formulas look wonky in the original post.

The 'n' is meant to sit just to the top right of the bracket. It is meant to show 'to the power of'.

So for the example given FV = 1000 * {(1.03) to the power of 15}

I've tried to fix but don't know how (space bar won't transfer across and tab takes me off the page?)

Sorry all - hope you can still understand

Lily

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