1. What is a Lumpsum Calculator?

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

Purpose: It helps investors project how their one-time investment might grow over time.

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 calculates compound interest, where interest earned each period is added to the principal.

3. Importance of Lumpsum Calculation

Details: Understanding potential growth helps with financial planning, retirement savings, and investment decisions.

4. Using the Calculator

Tips: Enter the principal amount, annual 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 is calculated only on the principal, while compound interest earns interest on both principal and accumulated interest.

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

Q3: What's a realistic rate of return?
A: Historical stock market returns average 7-10% annually, but conservative investments may yield 2-5%.

Q4: Does this account for inflation?
A: No, the results are nominal values. For real returns, subtract expected inflation from the rate.

Q5: Can I use this for debt calculations?
A: Yes, it works the same way for loans where interest compounds annually.