Note that this equation has 4 variables: FVN, PV, I/YR, and N. Here, we know all except FVN, so we solve for FVN. We will, however, often solve for one of the other three variables. By far, the easiest way to work all time value problems is with a financial calculator. Just plug in any three of the four values and find the fourth.
Finding future values (moving to the right along the time line) is called compounding. Note that there are 3 ways of finding FV3:
- $100(1.10)(1.10)(1.10) = $133.10.
- $100(1.10)3 = $133.10. Financial calculator:
This is especially efficient for more complex problems, including exam problems. Input the following values: N = 3, I/YR = 10, PV = -100, PMT = 0, and solve for FV = $133.10.