1. What is a Lump Sum MF Calculator?

Definition: This calculator computes the future value of a lump sum investment based on compound interest.

Purpose: It helps investors project how much a one-time investment will grow over time at a given interest rate.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( FV \) — Future value of investment ($)
• \( P \) — Principal amount ($)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of years invested

Explanation: The formula accounts for compound interest, where earnings are reinvested to generate additional earnings.

3. Importance of Future Value Calculation

Details: Understanding future value helps with financial planning, retirement savings goals, and investment decision making.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (e.g., 5% = 0.05), and investment period in years. All values must be ≥ 0.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest calculates on principal only, while compound interest calculates on principal plus accumulated interest.

Q2: How often is interest compounded in this calculator?
A: This assumes annual compounding. For different compounding periods, adjust the rate and years accordingly.

Q3: What's a typical rate of return for investments?
A: Historical stock market returns average 7-10% annually, but this varies by investment type and risk.

Q4: Can I calculate present value with this formula?
A: Yes, by rearranging the formula to solve for P instead of FV.

Q5: Does this account for inflation or taxes?
A: No, for real returns you should subtract inflation rate from your expected return rate.