1. What is the Capital Growth Formula?

The capital 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 interest rate.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( Investment \) — Initial investment amount
• \( r \) — Annual interest rate (as decimal)
• \( t \) — Time period in years

Explanation: The formula calculates how much an investment will be worth after compounding interest over a specified time period.

3. Importance of Capital Growth Calculation

Details: Understanding capital growth helps investors make informed decisions, plan for future financial goals, and compare different investment opportunities.

4. Using the Calculator

Tips: Enter the initial investment amount, annual interest rate (as a decimal), and time period in years. All values must be valid positive numbers.

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 is interest compounded in this formula?
A: This formula assumes annual compounding. For different compounding periods, the formula needs adjustment.

Q3: Can this formula be used for monthly investments?
A: No, this formula calculates growth for a single lump sum investment. Regular contributions require a different formula.

Q4: What is a good interest rate for investments?
A: Good interest rates vary by investment type and risk level. Generally, higher returns come with higher risk.

Q5: How does inflation affect capital growth?
A: Inflation reduces the real purchasing power of your returns. The formula shows nominal growth, not real growth adjusted for inflation.