Calculating Future Value Of An Investment Using Python And Numpy

 

Overview:

  • Future value of money is the value of a sum of money invested now seen at a future date.
  • Furture value can also be calculated for a series of cash flows that will happen over a period of time (starting from now).
  • The numpy.fv() function calculates the Future Value of an investment with additional periodic payments made towards the investment.
  • The numpy.fv() compounds the interest as specified by a compounding frequency. For example, if the compounding frequency is four it means the interest is calculated every quarter using compound interest.
  • The function also supports calculation of future values of payments where the due is during the beginning (i.e., annuity) of or end of each period.

Example 1: Payment Due at the end of each period

import numpy as np

 

initialInvestment       = 500;  # Initial investment

interestRate            = 0.05; # Annual rate of interest

compoundingFrequency    = 4;    # The interest is compounded every 3 months

quarterlyPayment        = 100;  # Payment towards investment 

numberOfYears           = 10;   # Future value of total investment upon expiry of this period

 

futureValue             = np.fv(interestRate/compoundingFrequency,

                                numberOfYears * compoundingFrequency,

                                -quarterlyPayment,

                                -initialInvestment);

 

print("Initial Investment:%5.2f"%initialInvestment);

print("Interest Rate:%2.2f"%interestRate);

print("Compounding Frequency:%d"%compoundingFrequency);

print("Investment on every quarter:%5.2f"%quarterlyPayment);

print("Investment period in years:%d"%numberOfYears);

print("Value of Investment upon expirty of %d years:%10.2f"%(numberOfYears,futureValue));

 

Output:

Initial Investment:500.00

Interest Rate:0.05

Compounding Frequency:4

Investment on every quarter:100.00

Investment period in years:10

Value of Investment upon expirty of 10 years:   5970.77

 

Example 2: Payment Due at the beginning of each period

import numpy as np

 

initialInvestment       = 1000;  # Initial investment

interestRate            = 0.04;  # Annual rate of interest

compoundingFrequency    = 12;    # The interest is compounded every 3 months

quarterlyPayment        = 100;   # Payment towards investment 

numberOfYears           = 5;     # Future value of total investment upon expiry of this period

 

futureValue             = np.fv(interestRate/compoundingFrequency,

                                numberOfYears * compoundingFrequency,

                                -quarterlyPayment,

                                -initialInvestment,when='begin');

 

print("Initial Investment:%5.2f"%initialInvestment);

print("Interest Rate:%2.2f"%interestRate);

print("Compounding Frequency:%d"%compoundingFrequency);

print("Invsetment on every quarter:%5.2f"%quarterlyPayment);

print("Investmemt period in years:%d"%numberOfYears);

print("Value of Investmemt upon expirty of %d years:%10.2f"%(numberOfYears,futureValue));

 

Output:

Initial Investment:1000.00

Interest Rate:0.04

Compounding Frequency:12

Invsetment on every quarter:100.00

Investmemt period in years:5

Value of Investmemt upon expirty of 5 years:   7872.99

 


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