To calculate the future value of an investment, we use the formula:
Future Value (FV) = Present Value (PV) × (1 + r)^n
Where:
- PV = Present Value (the initial amount of money)
- r = interest rate (as a decimal)
- n = number of years the money is invested or borrowed
In this case:
- PV = 500
- r = 6% = 0.06
- n = 1 year
Plugging in the values, we have:
FV = 500 × (1 + 0.06)^1
FV = 500 × 1.06
FV = 530
So, the future value of $500 one year from today at an interest rate of 6 percent will be $530. This means that by investing $500 today, you will have $530 after one year, thanks to the interest earned on your initial investment.