How to Calculate the Future Value of a Lump Sum Investment | Episode 38

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If you're deciding to invest a lump-sum over a period of time you can quickly determine what the future value of that investment would be. In this brief video I'll show you how to calculate the future value of a lump-sum investment.

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thank you for making this sound so much easier. i'm in a high school finance class, and i didn't understand this formula until now. Thank you!!

grwmei

Not to my knowledge. You'd almost have to treat the problem like two separate problems. The first thing you need to know is how frequently does interest compound. Depending upon the level of detail expected, you may even develop a amortization schedule, but you would need to know the loan maturity date for that. After doing this you can determine the remaining balance of the loan after three years of paying $300 towards the loan. Hope this helps.

Alanisbusinessacademy

Hi Great Videos.. Thanks so much.. wonder if you could help with a question eg. If $500 is invested at 7% compounded continuously, how long would it take for the value of the investment to reach $800

thanks
how would this be calculated.. thanks

michaeljuk

Great video and information. I basically hate anything that are related to calculation. But im taking my degree now and i need to take financial management class. This video really helped me a lot.

mohamadfaezaiman

why you always do it with years TT_TT, can you explain how to do it with days? please..

mariamalnaqbi

Compounding continuously works a little differently since it is being earned constantly as opposed to monthly, quarterly, or annually. I'm assuming you're being taught the PERT formula (like the shampoo), which is A = Pe^rt. P represents your principle, A represents your future value, r represents your interest rate in decimal form, and t represents the number of years. You would solve for t since you're trying to find the number of years. You'll need to use logarithms to undo the exponent.

Alanisbusinessacademy

Unfortunately I only have a financial calculator so I can't complete the calculations. However, with interest compounding daily it would be approximately 6.7 years. So your response should be somewhere around that figure. Good luck!

Alanisbusinessacademy

One more quick question is there a formula for a question like this..

A couple borrow $1000 to furnish their new home. They have to pay interest of
18% on this amount
If they repay $300 at the end of each year, how much do they owe at the end
of the third year of the loan?
is there a formula to work out the third year of the loan amout?

Thanks

michaeljuk

great but I couldn't get the right calculation for the (1+i )over the next can you tell me how to do that I have a professional calculator

wafaaahmed