1. What is the Investment Growth Formula?

The investment growth formula calculates the future value of an investment based on compound interest. It shows how money grows over time when interest is earned on both the initial principal and the accumulated interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( Principal \) — Initial investment amount
• \( Rate \) — Annual interest rate (in decimal form)
• \( Time \) — Investment period in years

Explanation: The formula accounts for compound growth, where interest is earned on both the original principal and the accumulated interest from previous periods.

3. Importance of Investment Calculation

Details: Understanding potential investment growth helps with financial planning, retirement savings, and comparing different investment options.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How often is interest compounded in this calculation?
A: This calculator assumes annual compounding. For different compounding periods, the formula would need adjustment.

Q2: Does this account for taxes or fees?
A: No, this is a basic calculation that doesn't consider taxes, investment fees, or inflation.

Q3: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.

Q4: Can I use this for monthly investments?
A: This calculator is for a single lump sum investment. For regular contributions, you'd need a different formula.

Q5: How accurate are these projections?
A: They're mathematically accurate for the given inputs, but real-world returns may vary due to market fluctuations.