The FRM (Future Value of an investment with Regular Deposits) Calculator is a financial tool used to determine the future value of an investment with regular deposits. It is particularly useful for understanding how an investment can grow over time based on various parameters.
Formula of FRM Calculator
The formula for calculating the Future Value (FV) using the FRM Calculator is:
FV = PV * (1 + r/n)^(n*t)
Where:
- FV represents the future value of the investment or sum of money.
- PV stands for the present value or initial principal amount.
- r is the annual interest rate.
- n is the number of times that interest is compound per year.
- t is the number of years the money is invested or borrowed for.
Table of General Terms
| Term | Description |
|---|---|
| Compound Interest | Interest calculated on the initial principal, which also includes all the accumulated interest from previous periods on a deposit or loan. |
| Present Value (PV) | The current value of a future sum of money or stream of cash flows, given a specified rate of return. |
| Annual Interest Rate | The rate at which interest is charged or paid, usually expressed as a percentage per year. |
| Future Value (FV) | The value of an asset or cash at a specified date in the future based on an assumed rate of growth. |
Example of FRM Calculator
Let’s consider an example to understand how the FRM Calculator works in a practical scenario:
Suppose an individual invests $500 initially, with an annual interest rate of 6%, compounded quarterly, and plans to invest for 5 years. You can calculate FRM using the formula.
Most Common FAQs
A: Compounding interest more frequently (e.g., quarterly or monthly) generally results in a higher future value due to the more frequent addition of interest to the principal amount.
A: The FRM Calculator is primarily suitable for investments with regular contributions or deposits.
A: The Future Value represents the total value of an investment after a specified time, incorporating both the initial investment and the compounded interest.