1. What is Simple Interest-Compounded Savings?

The simple interest-compounded savings formula calculates the future value of an investment based on the principal amount, annual interest rate, and time period. It assumes compound interest where earnings are reinvested to generate additional earnings.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( FV \) — Future value (USD)
• \( PV \) — Present value or initial investment (USD)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Investment period in years

Explanation: The formula accounts for exponential growth of money through compound interest over time.

3. Importance of Future Value Calculation

Details: Calculating future value helps in financial planning, comparing investment options, and understanding the power of compound interest over time.

4. Using the Calculator

Tips: Enter initial investment in USD, annual interest rate as decimal (e.g., 0.05 for 5%), and investment period in years. All values must be positive.

5. Frequently Asked Questions (FAQ)

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

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

Q3: What's a realistic interest rate for savings?
A: Typical savings accounts offer 0.5%-2%, while investments may yield 4%-10% annually historically.

Q4: How does inflation affect future value?
A: This calculator shows nominal value. For real value, subtract inflation rate from the interest rate.

Q5: Can I calculate monthly contributions with this?
A: No, this is for single lump-sum investments. For regular contributions, you'd need a different formula.