Time for action – determining future value

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. In this tutorial, let's take an interest rate of three percent, quarterly payments of 10 for 5 years and present value of 1,000.

Call the fv function with the appropriate values to calculate the future value.

print "Future value", np.fv(0.03/4, 5 * 4, -10, -1000)

The future value is as follows:

Future value 1376.09633204

This corresponds with saving for 10 years, with quarterly additional savings of 10 at an interest rate of three percent. If we vary the number of years and if we save and keep the other parameters constant, we will get following plot:

What just happened?

We calculated the future value using the NumPy fv function starting with a present value of 1,000; interest rate of three percent; and quarterly payments...