Compounding

We will begin this discussion of the time value of money with the concept of compounding. This is the process of going from today's value, or present value (PV), to future value (PV).

For instance, let's assume you put into the bank account $100 at an interest rate of 10% per year for 10 years.

PV = present value or starting amount in your bank account, which is $100.
i = interest rate per year or 10% in our case.
n = number of years the account will earn interest.
FV = future value of your money at the end of 10th year.

Now, let's calculate the future value of today's $100 at interest rate of 10% per year for 10 years.

FV = $100 X (1 + 10%)^10 years
FV = $100 X (1.10)^10
FV = $259.37

Therefore, after 10 years and initial saving of $100 at an interest rate of 10% per annum, you will end up having $259.37 in your account.
To calculate this copounded interest, please use this calculator provided for you.