1. What is the Maturity Value Formula?

The Maturity Value (MV) formula calculates the future value of an investment or loan based on compound interest. It shows how much money will be accumulated after a certain number of periods with a given interest rate.

2. How Does the Calculator Work?

The calculator uses the Maturity Value formula:

Where:

• \( MV \) — Maturity Value (USD)
• \( P \) — Principal amount (USD)
• \( r \) — Interest rate per period (decimal)
• \( n \) — Number of periods

Explanation: The formula accounts for compound interest, where interest is earned on both the initial principal and the accumulated interest from previous periods.

3. Importance of Maturity Value Calculation

Details: Calculating maturity value is essential for financial planning, investment analysis, and loan repayment estimation. It helps investors understand how their money will grow over time.

4. Using the Calculator

Tips: Enter principal in USD, interest rate as a decimal (e.g., 0.05 for 5%), and number of periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.

Q2: How often should periods be compounded?
A: The formula works for any compounding frequency (annual, quarterly, monthly) as long as the rate matches the period (annual rate for years, etc.).

Q3: Can this formula be used for loans?
A: Yes, it works for both investments and loans, showing the total amount that will need to be repaid.

Q4: What if the interest rate changes over time?
A: This formula assumes a constant rate. For variable rates, you would need to calculate each period separately.

Q5: How does inflation affect maturity value?
A: The formula doesn't account for inflation. For real returns, you would need to adjust for inflation separately.