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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. Go Premium for only $9.99 a year and access exclusive ad-free videos from Alanis Business Academy. Click here for a 14 day free trial: http://bit.ly/1Iervwb To view additional video lectures as well as other materials access the following links: YouTube Channel: http://bit.ly/1kkvZoO Website: http://bit.ly/1ccT2QA Facebook: http://on.fb.me/1cpuBhW Twitter: http://bit.ly/1bY2WFA Google+: http://bit.ly/1kX7s6P
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Text Comments (20)
Mariam Yaroof (11 months ago)
why you always do it with years TT_TT , can you explain how to do it with days? please..
socheat yin (1 year ago)
Monthly interest: 100$ Yearly interest: 0.05 Number of year: 5 FV=?
钟富 (2 years ago)
8%=0.08?or 0.8
You need to convert the 8% into a decimal so divide that figure by 100. That will give you .08.
Alex Gennaro (2 years ago)
FYI interest rate is usually denoted as r
Alex Gennaro (2 years ago)
+Alanis Business Academy Cool, didn't know that.
+Alex Gennaro Could go either way.
Walaa Ahmed (2 years ago)
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
Antonio Deleon (3 years ago)
what if you have everything but the interest rate what do i do?
Murray Melander (3 years ago)
How do solve for i?
Silje Eskeland (3 years ago)
When I am solving (1+0.8)^3, i get 1.24... what am I doing wrong?  Btw love your videos so much help. :)
+Silje Eskeland Glad to hear that. Take care!
Silje Eskeland (3 years ago)
Thank you so much, it did also make a lot ot sense when I saw how you did it. This is really helpfull.  Have a nice day. 
+Silje Eskeland Thank you very much! I appreciate that. It appears as though you're getting the order of operations a little mixed up. Based on the result of 1.24, you're probably multiplying .8 by 3 to get .24, and then adding .24 to 1 to receive 1.24. First thing, the discount rate is 8% so in decimal form you'll need to use .08. Adding .08 to 1.00 you'll get 1.08. From there you can get the correct response one of two ways. First is by multiplying 1.08 x 1.08 x 1.08. This is the long-way of cubed, which is represented by the n (3). The second option is to simply type 1.08 into your calculator and hit the key that looks something like this: y^x. The x will be a superscript, which means it's very small and above the y. Then hit 3, which tells your calculator to multiple this number to the 3rd power. You should receive 1.2597120. Hope this helps. Thanks for watching!
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.
mala juk (4 years ago)
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
mala juk (4 years ago)
Thanks for the Quick reply.. Not very familiar with the formula, but will learn and try it out.. Thanks once again for your help
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!
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.
mala juk (4 years ago)
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
Henry K Kulee (5 years ago)
Great video!

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