1. What is Annuity Future Value?

The future value of an annuity calculates how much a series of regular payments will be worth at a future date, given a specified interest rate. It's essential for retirement planning, loan calculations, and investment analysis.

2. How Does the Calculator Work?

The calculator uses the annuity future value formula:

Where:

• \( FV \) — Future value of the annuity
• \( PMT \) — Periodic payment amount
• \( r \) — Periodic interest rate (as decimal)
• \( n \) — Number of payment periods

Explanation: The formula accounts for compound interest on each payment over time, summing the future value of each individual payment.

3. Importance of Annuity Calculation

Details: Understanding annuity future value helps in financial planning, comparing investment options, and making informed decisions about savings and retirement plans.

4. Using the Calculator

Tips: Enter payment amount in dollars, interest rate as decimal (e.g., 0.05 for 5%), and number of periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ordinary annuity and annuity due?
A: Ordinary annuity assumes payments at end of each period, while annuity due assumes payments at beginning. This calculator assumes ordinary annuity.

Q2: How does compounding frequency affect the calculation?
A: You must use the periodic rate that matches your payment frequency (monthly rate for monthly payments, etc.).

Q3: Can this be used for loan calculations?
A: Yes, it can calculate the future value of loan payments, though typically loans use present value calculations.

Q4: What if my payments change over time?
A: This formula assumes constant payments. For variable payments, each payment must be calculated separately.

Q5: How accurate is this calculation for real-world investments?
A: It provides a mathematical ideal. Real-world returns may vary due to changing rates, fees, and other factors.