What is the future value formula for a value two periods in the future?

The future value formula calculates the value of an investment at a specified date in the future based on its present value and an interest rate over a number of periods. For a value two periods in the future, the formula incorporates both the present value and the growth that the investment will experience over those two periods due to the interest rate.

When using the formula, FV2 = PV(1 + i)², it highlights the compounding effect of interest. Here, "PV" represents the present value, "i" is the interest rate per period, and raising the term (1 + i) to the power of 2 signifies that this growth is being compounded over two periods. Each period applies the interest rate to the entire amount accumulated up to that point, effectively increasing the future value exponentially with each additional period.

This understanding is essential for evaluating investment returns and making informed financial decisions over time. In this scenario, the correct formula captures the essence of compounding interest over exactly two periods, leading to the accurate calculation of future value.