The future value concept is an essential aspect of the time value of money.

Future value calculates how much an investment made today will grow to at a future date, considering a specified interest rate.

For example, consider Nick, who wants to invest two thousand dollars.

Let us compare two investment options for Nick to determine which is better based on the future value concept.

The first option is to invest two thousand dollars in a savings account with an annual rate of five percent. After one year, this investment would grow to two thousand one hundred dollars.

The second option is to invest the same amount in bonds with a six percent annual return. After one year, this investment would grow to two thousand one hundred twenty dollars.

When only considering the future values of both options, an investment in bonds is a better option for Nick.

The future value concept can help investors and financial planners compare various investment options, as it helps estimate the growth of savings and investments over time.