1. What Is a Lump Sum Investment Calculator?

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

Purpose: It helps investors understand how their money could grow over time with a one-time investment.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( FV \) — Future value of investment ($)
• \( P \) — Principal lump sum amount ($)
• \( r \) — Annual interest rate (in decimal)
• \( n \) — Investment period in years

Explanation: The formula accounts for compound growth where interest earns additional interest over time.

3. Importance of Lump Sum Calculations

Details: Understanding potential growth helps with financial planning, retirement savings, and investment decision-making.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (e.g., 5% = 0.05), and number of years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: How is this different from regular savings?
A: This calculates growth for a single deposit, not regular contributions (use a different calculator for recurring investments).

Q2: Does this account for inflation?
A: No, the result shows nominal future value. For real value, subtract expected inflation from the interest rate.

Q3: How often is interest compounded?
A: This assumes annual compounding. For more frequent compounding, adjust the rate and periods accordingly.

Q4: What's a realistic interest rate?
A: Historically, stock market returns average 7-10% annually, bonds 3-5%, savings accounts 1-3%.

Q5: Can I use this for retirement planning?
A: Yes, for estimating growth of rollovers or windfalls, but consider taxes and inflation in your planning.