Future Value (FV): 0 $
The Garman/Forgue Companion Calculator is a financial tool that assists in determining the future value of an investment, taking into account compound interest. It’s a powerful concept in finance, as it allows your investment to grow exponentially over time. This calculator helps you make informed financial decisions by projecting the potential value of your investments.
The Formula of Garman/Forgue Companion Calculator
To use the Garman/Forgue Companion Calculator effectively, you need to understand the formula it’s based on. The formula for calculating the future value of an investment with compound interest is as follows:
FV = PV * (1 + r/n)^(n*t)
Here’s what each variable represents:
- FV (Future Value): The amount your investment will grow to.
- PV (Present Value): The initial investment or principal amount.
- r (Annual Interest Rate): The annual interest rate in decimal form (e.g., 5% as 0.05).
- n (Number of Compounding Periods Per Year): The frequency at which interest is compounded annually.
- t (Number of Years): The duration of the investment in years.
This formula is the cornerstone of the Garman/Forgue Companion Calculator, and it allows you to project the future value of your investments with precision.
General Terms for Easy Understanding
| Term | Definition |
|---|---|
| Compound Interest | Interest calculated on both principal and accumulated interest. |
| Present Value (PV) | The initial amount of money invested. |
| Future Value (FV) | The projected amount the investment will grow to. |
| Annual Interest Rate (r) | The yearly interest rate in decimal form. |
| Compounding Frequency (n) | The number of times interest is compounded in a year. |
| Number of Years (t) | The duration for which the investment is held. |
Example of Garman/Forgue Companion Calculator
Let’s put the calculator to use with an example:
Suppose you invest $5,000 (PV) at an annual interest rate of 4% (0.04) with interest compounded quarterly (n = 4) for 5 years (t = 5). To find the future value (FV) of your investment:
FV = 5000 * (1 + 0.04/4)^(4*5) FV = 5000 * (1 + 0.01)^20 FV ≈ 5000 * (1.219064) FV ≈ $6,095.32
So, your investment is will be approximately $6,095.32 after 5 years.
Most Common FAQs
The more frequent the compounding, the higher the overall returns because interest is being reinvested more frequently.
Yes, the calculator is for a wide range of investments, from savings accounts to long-term investments, as long as you have the required input values.
The Garman/Forgue Companion Calculator assumes a constant interest rate. If your investment has variable rates, you may need to perform separate calculations for each rate period.