What happens when you increase the expected rate of return? Solution Future value of an investment = Periodic savings x Future Value Interest Factor of Annuity, FVIFA (r%, N periods) As expected rate of return (r) increases, FVIFA increases. So, with periodic savings and N remaining unchanged, higher rate of return will increase future value. Same logic applies when we compute future value of a single lump-sum: Future Value (FV) = Present Value (PV) x Future Value Interest Factor, FVIF (r%, N years) Higher rate of return increases FVIF and increases FV (keeping PV and N unchanged). Therefore, as expected rate of return increases, future value increases (and present value decreases). .