1. What is Future Value Calculation?

Future Value calculation determines how much an investment made today will grow to in the future, considering compound interest. It helps investors understand the potential growth of their money over time.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( FV \) — Future Value of the investment
• \( P \) — Principal amount (initial investment)
• \( r \) — Annual interest rate (as a decimal)
• \( t \) — Time period in years

Explanation: The formula calculates how much your initial investment will grow when interest is compounded annually over a specified time period.

3. Importance of Investment Planning

Details: Understanding future value helps in making informed investment decisions, setting financial goals, and planning for retirement or major expenses.

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

Q2: How often is interest compounded in this calculator?
A: This calculator assumes annual compounding. For more frequent compounding, the formula would need adjustment.

Q3: Can I use this for monthly investments?
A: This calculator is designed for single lump-sum investments. For regular contributions, a different formula is needed.

Q4: What factors affect investment growth?
A: Principal amount, interest rate, time period, compounding frequency, and inflation are key factors.

Q5: Is this calculation affected by taxes?
A: This calculation shows gross returns before taxes. Actual returns may be lower after accounting for taxes on investment gains.