Series 65 Exam Concept

Here is an example of how to calculate the future value of a sum of money invested today at a specified rate of return. It is helpful when planing for a future expense such as retirement or college expenses.

The formula is as follows:
T
FV = PV (1 + R)

FV = Future Value
PV = Present Value
R = Interest rate
T = The number of compounding periods for which the money will be invested

Example:

FV = ?
PV = $1,000
R = 5%
T = 5 years compounded annually
5
FV = $1,000 (1 +.05)
FV = $1,000 (1.276)

FV = $1,276

10
FV = $1,000 (1 +.025)
FV = $1,000 (1.28)

FV = $1,280