Future Value of Money Calculation –Basic – tutorial video lesson review
Hello and welcome back to MBAbullshit.com. Our topic for this video is Future Value also
known as FV. Before anything else, remember that you can always go back to MBAbullshit.com
for free tutorial lessons for business students in college, BBA or MBA, or for executives
who would like refreshers on topics they may have already known in the past or they just
want to learn basic MBA concepts. Maybe they don’t have time for MBA’s or maybe you
are a non-business moron like me before maybe you are an artist or a doctor or whatever
and you have to learn business concepts for your art business or anything that you might
need these MBA concepts for. Let’s cut right through the chase.
Okay, now, most professors would start out by teaching the Future Value using this scary
bullshit formula over here. Now I know it looks scary and intimidating but don’t panic.
I want you to first remove this formula from your brains for now and instead I want you
to listen to a story. I’m going to tell you a quick story right now, alright.
Now, let’s say that today I give you $200 and you use this $200 and you deposit it in
a bank and the bank will give you a 6% interest rate and you keep your $200 in the bank for
7 years. The question now is how much will you have after these 7 years?
I think it’s quite easy, well, maybe not yet but I’ll tell you the answer and the
answer is you will have $300. If you put $200 in a bank for 7 years and you get 6% interest
then you will have $300 after that 7 years. The next question is how did I compute this
$300? Did I just guess it or did I compute it? The answer is I computed it. What formula
did I use to compute it? It’s very simple and I use this formula which we already saw
in the beginning, alright. Again, don’t panic. This is a very simple formula once
we cut through the bullshit and I show you how easy it is.
First of all, going back here, this amount that we’re looking for is actually called
Future Value and is written as FV and this FV is exactly the same as the FV that you
see in the formula up here, okay? Now something to remember, this FV is only one variable,
alright, it is one variable. You might have learned in your earlier days as a child or
in high school that FV means two variables, F and V and that FV means F multiplied by
V, right? But no, in our case it is just one simple variable. Now, let’s move on.
This $200 that I’m giving you today is called the Present Value, “present” means today,
$200 is known as the Present Value and it is written as PV. Again, this is just one
variable PV and that is the same variable that you see up there in the formula as PV.
Next, this interest rate over here is written is 6% and is written as the letter r and that
is the same r that you see up there in the formula. Next, we know about the number of
years, we know its number 7 and the number of years is written as the letter n, n stands
for number and it is the same n that you see up there in the formula so it’s simple.
Now using this formula up here and using these values over here it’s now very simple to
use these values and to plug them into this formula over here, so, 200 as we know is PV,
it ends up going over here. The r as we know is 6% and it ends up going over here. The
n as we know is 7 and it ends up going over here. It looks pretty messy right now but
if we write it down neatly and clearly it will look like this. So, $200 is the Present
Value, .06 means 6%, and number of years was 7 hence it that goes up here as the exponent
value over here. Now remember 6% is written as .06, it is not written as .6, .6 means
60% but .06 means 6%. Now using this formula and using these values will come up with a
simpler formula looking like this and in the end we will find our $300. See, that’s how
simple it is. It was as simple as that using this formula which looks scary but as you
see it is actually very simple. Remember, you can always go back to MBAbullshit.com
for more free videos on business topics and will be explained very clearly. I hope you
learned a lot from this and I hope you have enjoyed the video. Remember, to please retweet
us if you like what you saw today and if you learn something, alright. Goodbye.
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