1. What is Ordinary Annuity Future Value?

The future value of an ordinary annuity calculates how much a series of equal payments made at the end of each period will be worth in the future, given a specific interest rate. It's a fundamental concept in time value of money calculations.

2. How Does the Calculator Work?

The calculator uses the ordinary 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, with payments made at the end of each period.

3. Importance of Future Value Calculation

Details: Calculating future value helps in financial planning for retirement savings, loan payments, and investment growth projections.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

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

Q2: How does compounding frequency affect the calculation?
A: The periodic rate (r) and number of periods (n) must match the compounding frequency (e.g., monthly, quarterly).

Q3: Can this be used for irregular payments?
A: No, this formula only works for equal periodic payments. Uneven cash flows require different calculations.

Q4: What if the interest rate changes over time?
A: This formula assumes a constant rate. Changing rates require more complex calculations.

Q5: How accurate is this calculation for real-world scenarios?
A: It provides a theoretical value assuming perfect conditions. Actual returns may vary due to fees, taxes, and rate fluctuations.