How the tVM Calculator works
Time value of money says a dollar today is worth more than a dollar later because it can earn a return in between. This calculator grows your present value forward and stacks the future value of an ordinary annuity of payments on top.
FV = PV(1+r)n + PMT × ((1+r)n − 1) ÷ r
Example: $5,000 today plus $2,000 added each year at 6% grows to about $35,300 in 10 years, with $8,954 coming from the original lump sum and the rest from the payment stream.
Frequently asked questions
What are the five TVM variables?
Present value, future value, payment, rate, and number of periods. Fix any four and the fifth is determined, which is exactly what financial calculators solve.
Payments at the start or end of the period?
This tool assumes end-of-period payments, called an ordinary annuity. Payments at the start (an annuity due) earn one extra period of interest, multiplying the payment portion by (1+r).
How does inflation fit in?
Use a real rate (your rate minus inflation) and the future value comes out in today's purchasing power. Use the nominal rate and it comes out in future dollars.