Find the future value of a lump sum at a given interest rate.
FV = PV × (1 + r)ⁿ.
Future value answers a simple question — what will a sum of money, or a series of contributions, be worth at a future date given a specified growth rate — but the honest answer is that the formula itself is the easy part. The real uncertainty sits entirely in the assumed rate of return, which is a projection, not a guarantee. A future value calculation run at 12% versus 8% for the same 20-year horizon can produce dramatically different end numbers from the same starting contribution, so the output should always be read as "here's what happens if this rate holds," not as a promised outcome.
There are two distinct versions worth telling apart: the future value of a lump sum (money invested once and left to grow) and the future value of an annuity (regular contributions added at fixed intervals, each with a different amount of time left to compound). The annuity version is what most real financial planning actually uses — monthly SIPs, regular retirement contributions — and it's worth noting that contributions made earlier in the period benefit from more compounding time than contributions made later, so the timing of contributions within a plan (start-of-period versus end-of-period) also has a small but real effect on the final total.
A lump sum future value calculates growth on a single one-time investment. An annuity future value calculates the combined growth of a series of regular contributions (like a monthly SIP), where each contribution has a different amount of time left to compound before the end date — the earliest contributions grow the most.
Very sensitive, especially over long time horizons. Small differences in the assumed annual rate — say 8% versus 12% — compound into large differences in the final projected amount over 15-20+ years. Always treat the rate as an assumption to stress-test with a few different scenarios, not as a fixed input.
Yes, though the effect is smaller than the rate assumption. Contributions made at the start of each period (an 'annuity due') have slightly more time to compound than contributions made at the end of each period (an 'ordinary annuity'), producing a marginally higher future value for the same contribution amounts.
Both, for different questions. Future value answers 'what will my current savings and contributions grow to by retirement?' Present value answers 'how much do I need today to fund a future goal?' Most complete retirement plans use future value to project savings growth and present value (or a related annuity calculation) to check whether that pot can sustainably fund future withdrawals.