1. What is the Investment Calculator?

The Investment Calculator uses the compound interest formula to calculate the future value of an investment. It helps investors understand how their money can grow over time with compound interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( P \) — Principal amount (initial investment)
• \( r \) — Annual interest rate (as a decimal)
• \( n \) — Number of years

Explanation: The formula calculates how much an investment will grow over time when interest is compounded annually.

3. Importance of Investment Calculation

Details: Understanding compound interest is crucial for financial planning, retirement savings, and making informed investment decisions. It shows the power of time and consistent returns on investment growth.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What is compound interest?
A: Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods.

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

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 both principal and accumulated interest.

Q4: Can I use this for monthly investments?
A: This calculator is for single lump-sum investments. For regular contributions, a different formula is needed.

Q5: How accurate are these calculations?
A: The calculations are mathematically accurate based on the inputs, but actual investment returns may vary due to market conditions and fees.