If a sum is invested today, it will earn interest and increase in value over time. The value that the sum grows to is known as its future value. Computing the future value of a sum is known as compounding. The present value of a sum is the amount that would need to be invested today in order to be worth that sum in the future. Computing the present value of a sum is known as discounting.

If a sum is invested today, it will earn interest and increase in value over time. The value that the sum grows to is known as its

future value.Computing the future value of a sum is known ascompounding.Thepresent valueof a sum is the amount that would need to be invested today in order to be worth that sum in the future. Computing the present value of a sum is known asdiscounting.