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Procedure of measurement of Future Value
If we are getting a return of 10 % in one year then what is the return we are going to get in two years? 20 %, right. What about return on 10 % that you are going to get at the end of one year? If we also take it into consideration the interest which we get on this 10 % then we get a return of 10 + 1 = 1 1 % in second year making for a total return of 21 %. This is the same as compound value calculations.
Future Value = (Investment or Present Value) * (1 + Interest) No. of time Periods
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