Enter the principal amount, rate of interest, time, and number of compounds into the calculator to determine the future value of an investment using the Chancellor's Formula.
Chancellor's Formula
The following formula is used to calculate the future value of an investment using compound interest:
FV = P * (1 + r/n)^{(n*t)}Variables:
- FV is the future value of the investment
- P is the principal amount
- r is the annual interest rate (as a decimal)
- n is the number of times that interest is compounded per year
- t is the time the money is invested for, in years
To calculate the future value using Chancellor's Formula, multiply the principal amount by the compound interest factor, which is one plus the annual interest rate divided by the number of compounds, raised to the power of the number of compounds times the number of years.
What is Chancellor's Formula?
Chancellor's Formula is a mathematical equation used to calculate the future value of an investment based on compound interest. It takes into account the principal amount, the annual interest rate, the number of times interest is compounded per year, and the total number of years the money is invested. This formula is useful for investors to estimate the growth of their investments over time.
How to Calculate Future Value with Chancellor's Formula?
The following steps outline how to calculate the future value of an investment using Chancellor's Formula.
- First, determine the principal amount (P).
- Next, determine the annual interest rate (r) and convert it to a decimal by dividing by 100.
- Determine the number of times the interest is compounded per year (n).
- Determine the time the money is invested for (t) in years.
- Use the Chancellor's Formula: FV = P * (1 + r/n)^(n*t).
- Finally, calculate the future value (FV).
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Principal Amount (P) = $1,000
Annual Interest Rate (r) = 5%
Number of Compounds (n) = 4 (quarterly)
Time (t) = 10 years
