You want to know how much 10,000 invested today is going to be worth in 10 years from now. Which type of time value of money calculation should be used to slice this problem?

There are two options to calculate the type of time value of any investment or loan: simple interest or compound interest. You can see the formulas below for calculating the interests.

Step-by-step explanation:

There are two options to calculate the value of your money in the future. Simple interest rate when the interests will be paid fully at the end of the term, in this case, 10 years as a part of the principal and are calculated as follows:

Interest = Principal * Interest rate * Time

But normally, simple interest is not frequently used on investments, loans, and financial services, what normally happens is that the interest is added or compounded to the principal, and the next interest calculation is done on both the principal and the interest.

Interest can be compounded at intervals known beforehand, annually, quarterly, monthly, weekly or even daily.

To calculate compound interest over a period of time, the following formula is used:

Interest = Principal * (1 + r/n) ⁿˣ - Principal,

where r is the interest rate, n is the number of times per year interest is compounded, and x is the length of time in years.