1. What is 7% Return on Investment?

The 7% return on investment (ROI) represents a compound annual growth rate of 7%. This is a common benchmark for long-term stock market returns adjusted for inflation.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( FV \) — Future Value
• \( P \) — Principal investment amount
• \( 0.07 \) — 7% annual return rate
• \( t \) — Time in years

Explanation: The formula calculates how an investment grows over time with compound interest at a constant 7% annual rate.

3. Importance of ROI Calculation

Details: Understanding potential investment growth helps with financial planning, retirement savings projections, and comparing investment options.

4. Using the Calculator

Tips: Enter your initial investment amount in USD and the number of years you plan to invest. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is 7% a realistic return expectation?
A: Historically, the S&P 500 has returned about 7% annually after inflation, but actual returns vary year to year.

Q2: Does this account for taxes or fees?
A: No, this is a simplified calculation that doesn't account for taxes, investment fees, or other costs.

Q3: What's the difference between simple and compound interest?
A: Compound interest earns returns on both principal and accumulated interest, while simple interest only earns on principal.

Q4: How often is the interest compounded in this calculation?
A: This assumes annual compounding for simplicity.

Q5: Can I use this for other return rates?
A: This calculator is specifically for 7% returns. For different rates, you would need a different calculator.