The future value gives the value of a financial instrument at a future date, based on certain assumptions. The future value depends on four parameters—the interest rate, the number of periods, a periodic payment, and the present value.
Read more about future value at http://en.wikipedia.org/wiki/Future_value. The formula for future value with compound interest is as follows:
In the preceding formula, PV is the present value, r is the interest rate, and n is the number of periods.
In this section, let's take an interest rate of 3
percent, a quarterly payment of 10
for 5
years, and a present value of 1000
. Call the fv()
function with the appropriate values (negative values represent outgoing cash flow):
print("Future value", np.fv(0.03/4, 5 * 4, -10, -1000))
The future value is as follows:
Future value 1376.09633204
If we vary the number of years we save and keep the other parameters constant, we get the following plot:
We calculated the future value using the NumPy fv()
function starting with a present value of 1000
, an interest rate of 3
percent, and quarterly payments of 10
for 5
years. We plotted the future value for various saving periods (see futurevalue.py
):
from __future__ import print_function import numpy as np import matplotlib.pyplot as plt print("Future value", np.fv(0.03/4, 5 * 4, -10, -1000)) fvals = [] for i in xrange(1, 10): fvals.append(np.fv(.03/4, i * 4, -10, -1000)) plt.plot(range(1, 10), fvals, 'bo') plt.title('Future value, 3 % interest, Quarterly payment of 10') plt.xlabel('Saving periods in years') plt.ylabel('Future value') plt.grid() plt.legend(loc='best') plt.show()