Future value and compounding are crucial for businesses and individuals as they measure how investments grow over time, maximizing wealth and financial security.

The future value of an investment is the initial amount or present value compounded by the growth factor over periods.

Meet Sophia, who plans to retire at the age of sixty.

At thirty, she decided to invest twenty thousand dollars in a retirement fund that grows at an average of five percent yearly.

The investment time span is thirty years, considering Sophia's planned retirement age.

She calculates the future value of her investment using the future value formula.

The future value of Sophia's investment will grow to approximately eighty-six thousand four hundred thirty-nine dollars by the time she retires.

This calculation of future value shows the power of compounding interest, where small investments grow significantly over thirty years.

The future value concept highlights the importance of starting early and the impact of compound growth on long-term financial planning.