1. What is the Trust Fund Formula?

The Trust Fund formula calculates the future value of an investment based on compound interest. It shows how a principal amount grows over time at a specified interest rate.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( Principal \) — Initial investment amount ($)
• \( r \) — Annual interest rate (unitless)
• \( t \) — Time in years

Explanation: The formula calculates how much an initial investment will be worth after earning compound interest over a specified period.

3. Importance of Future Value Calculation

Details: Calculating future value is essential for financial planning, investment analysis, and understanding how money grows over time through compound interest.

4. Using the Calculator

Tips: Enter the principal amount in dollars, the interest rate as a decimal (e.g., 0.05 for 5%), and the time period in years. All values must be valid (principal > 0, rate ≥ 0, time ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What is compound interest?
A: Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods.

Q2: How does time affect future value?
A: The longer the time period, the greater the effect of compound interest, resulting in higher future values.

Q3: 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 principal and accumulated interest.

Q4: Can this formula be used for different compounding periods?
A: This calculator assumes annual compounding. For different compounding periods, the formula needs adjustment.

Q5: How accurate is this calculation for real investments?
A: This provides a theoretical calculation. Actual investment returns may vary due to market conditions, fees, and taxes.