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Ordinary Annuity Future Value Formula:
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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 commonly used for retirement planning, savings goals, and investment analysis.
The calculator uses the ordinary annuity future value formula:
Where:
Explanation: The formula accounts for compound interest on each payment, with payments made at the end of each period (ordinary annuity).
Details: Calculating future value helps in financial planning, comparing investment options, and understanding how regular savings can grow over time with compound interest.
Tips: Enter the periodic payment amount in dollars, the interest rate per period as a decimal (e.g., 0.05 for 5%), and the number of periods. All values must be positive.
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. Annuity due has slightly higher future value.
Q2: How does compounding frequency affect the calculation?
A: The calculator uses the periodic rate - make sure to adjust annual rates to match your payment frequency (divide annual rate by number of periods per year).
Q3: Can I use this for monthly savings calculations?
A: Yes, just use the monthly interest rate (annual rate ÷ 12) and number of months as periods.
Q4: What if my payments increase over time?
A: This calculator assumes constant payments. For growing annuities, a different formula is needed.
Q5: How accurate is this calculation for real-world scenarios?
A: It provides a mathematical projection assuming constant rates and payments. Actual results may vary due to changing rates, fees, or payment amounts.