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 an initial investment grows over time at a specified rate of return.

2. How Does the Calculator Work?

The calculator uses the investment growth formula:

Where:

• \( FV \) — Future Value ($)
• \( PV \) — Present Value ($)
• \( r \) — Growth Rate (dimensionless)
• \( n \) — Number of periods

Explanation: The formula calculates compound growth where earnings are reinvested and generate additional earnings over time.

3. Importance of Future Value Calculation

Details: Calculating future value helps investors understand the potential growth of their investments, plan for financial goals, and make informed investment decisions.

4. Using the Calculator

Tips: Enter present value in dollars, growth rate as a decimal (e.g., 0.05 for 5%), and number of periods. All values must be valid (PV > 0, r ≥ 0, n ≥ 1).

5. Frequently Asked Questions (FAQ)

Q1: 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 the principal and accumulated interest.

Q2: How often should the growth rate be compounded?
A: The formula assumes compounding occurs at the end of each period. For different compounding frequencies, the formula needs adjustment.

Q3: Can this formula be used for negative growth rates?
A: Yes, the formula works for negative growth rates (r < 0) which represent depreciation or loss of value.

Q4: What are typical growth rate values?
A: Growth rates vary by investment type. Stocks may average 7-10% annually, bonds 3-5%, while savings accounts typically offer 1-3%.

Q5: How accurate are future value projections?
A: Projections are estimates based on constant growth rates. Actual results may vary due to market fluctuations and changing economic conditions.