What does the term "future value" refer to in finance?

The term "future value" in finance represents the total amount of money that an initial investment will grow to over a specified period, considering a particular interest rate. It reflects how much that investment will be worth at a future date, which accounts for interest compounding over time. This concept is crucial for understanding how investments can increase in value, giving investors insight into potential earnings based on their investment duration and the interest conditions.

This understanding is essential when making financial decisions, as it allows individuals and businesses to evaluate how current investments may yield returns in the future. In contrast, the other options refer to different financial concepts: the current value of an investment relates to present worth, the sum of all principal and interest earned may overlap slightly but doesn't capture the entire essence of future value, and the initial amount of money invested without interest does not speak to the growth element that future value encapsulates.