To be able to calculate the future value of your investment.

Future Value of Money: How much your money with be worth in the

future if you invest it. Rate of Return:

The interest rate that you earn on your money that you invest (ex: 8%)

Principle: The money you actually invested (not

counting any interest earned.)

The formula that calculates how long it

will take your money to double at a

given interest rate.

72 ÷ Interest Rate = # Years to Double Money

72 ÷ 8 = 9 Years to Double Money

Interest earned only on the principle. (Not the interest you already earned.) Usually figured annually or biannually Compute using formula FV = PIT + P

FV = (Principle x Interest x Time) + Principle

FV = ($1,000 x 6% x 3 years) + $1,000

Future Value of Your investment = $1,180

Interest earned on the principle AND the interest you already earned. Usually figured monthly or quarterly Must use a financial calculator or an

“N-Chart” to find future value.

FV = N x Principle

If you were investing money, would you want to use Simple or Compound Interest?

If you are taking a loan from a bank or credit card, which one would you want?

Let’s put it to practice…