The formula $$fv = pv(1 + r)^n$$ is used to calculate the future value (fv) of an investment or a sum of money based on its present value (pv), the interest rate (r), and the number of periods (n) it will be invested or borrowed. This formula illustrates the principle of the time value of money, showing that a sum of money today is worth more than the same sum in the future due to its potential earning capacity. Understanding this equation is essential for making informed financial decisions about investments and savings.
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