Lump Sum Investment Calculator
Future Value (Regular):
Future Value (Inflation Adjusted):
Lumpsum Mutual Fund Calculator Formula
The basic formula for calculating the future value (FV) of a lump sum investment is:
Future Value = P × (1 + r)^n
where:
- P is the principal amount (initial investment)
- r is the annual interest rate (expressed as a decimal)
- n is the number of years the money is invested
Adjusting for Inflation
To adjust for inflation, use the following formula to find the inflation-adjusted future value (real future value):
Real Future Value = Future Value / (1 + i)^t
where:
- i is the annual inflation rate (expressed as a decimal)
- t is the number of years the money is invested
Combined Formula
Combining both the future value formula and the inflation adjustment, the formula becomes:
Real Future Value = P × (1 + r/n)^(n × t) / (1 + i)^t
Example Calculation
Suppose you invest $10,000 (P) at an annual interest rate of 7% (r = 0.07) for 10 years (t) with annual compounding (n = 1) and the annual inflation rate is 2% (i = 0.02).
- Calculate the Future Value (FV):
Future Value = 10,000 × (1 + 0.07)^10 Future Value = 10,000 × (1.07)^10 Future Value ≈ 19,671.51
- Adjust for Inflation:
Real Future Value = 19,671.51 / (1.02)^10 Real Future Value = 19,671.51 / 1.21899 Real Future Value ≈ 16,140.65
Therefore, after adjusting for 2% inflation, the real future value of your $10,000 investment at a 7% annual return over 10 years would be approximately $16,140.65.