Overview

Main Menu Name: Compound

Calculates the value a lump sum will grow to by a target year if compounded at a specified interest (or growth) rate. Calculations are shown not only for the interest rate entered, but also for six additional growth rates. Simultaneously, it illustrates five and 10 years before and after the targeted year at each of the seven rates.

In this article:

• Background
• Why should I use this calculator?
• Getting Started
• Entering Data
• Results

Background

The future value of a lump sum equals the growth of that lump sum over a designated period of time. The date of the original investment (or the current date in the case of projecting the growth in a client's estate) marks the beginning of the investment period. Computations assume that no additional investments will be made, that no funds will be withdrawn for the entire time, and that the assumed rate of return will be constant over the selected period.

Why should I use this calculator?

• Calculate how much an investment fund will be worth upon retirement or at some other target date.
• Illustrate the importance and impact of increasing the interest rate.
• Illustrate the importance and impact of increasing the time period over which an investment will grow.
• Demonstrate the growth in a client's estate and show a client how much the total estate is likely to exceed the estate tax protection afforded by the unified credit.

Getting Started

The future value of a lump sum equals the growth of that lump sum over a designated period of time. The date of the original investment (or the current date in the case of projecting the growth in a client's estate) marks the beginning of the investment period. Computations assume that no additional investments will be made, that no funds will be withdrawn for the entire time, and that the specified rate of return will be constant over the selected period.

Entering Data

1. Investment Amount:  Enter the amount of the initial investment.
2. After-Tax Growth Rate:  Enter the after-tax growth rate of the investment.
3. Start Year:  Enter first year of the investment.
4. Target Year:  Enter the target year.

Results

The program will calculate the target year future value of the investment amount entered, using the interest (or growth) rates you have specified. The program will also show three additional growth rates below and above the entered growth rate. And, it will show compounded vales for four targeted years.