The numbers represent the end of a period. This simple idea is the foundation of the time value of money. The Cardinal Sin of finance is to add or subtract or compare cash flows occuring at different points in time. No one would add apples to oranges or dollars to yen, nor should they add dollars now to dollars one year from now. We first 'translate' future dollars to current dollars, or current dollars to future dollars, and then we can add or subtract or compare them.
Future value involves 'translating' current dollars into future dollars.
It translates current dollars into equivalent future dollars. This process is called compounding . 6869.4 Notice that PV is entered with a minus sign. Your calculator assumes initial cash flows are outflows and later cash flows are inflows. Since we only know how to calculate FV for one period we will break the problem into two one-period problems.