Home
Back
Ordinary Annuity Future Value Formula:
| From: | To: |
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. This is commonly used for retirement planning, savings accounts, and loan calculations.
The calculator uses the ordinary annuity future value formula:
Where:
Explanation: The formula accounts for compound interest on each payment, with each payment compounding for one fewer period than the previous one.
Details: Calculating future value helps in financial planning, determining how much savings will grow over time, and comparing different investment options.
Tips: Enter the periodic payment amount in dollars, interest rate per period in decimal form (e.g., 0.05 for 5%), and 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 higher future value as each payment compounds for an extra period.
Q2: How does compounding frequency affect the calculation?
A: The formula assumes the payment frequency matches the compounding frequency. For different frequencies, adjust the rate and periods accordingly.
Q3: What if the interest rate is zero?
A: When r=0, the formula simplifies to FV = PMT × n, as there's no compounding.
Q4: Can this be used for monthly savings calculations?
A: Yes, just ensure the interest rate is the monthly rate and n is the number of months.
Q5: How accurate is this calculation for real-world scenarios?
A: It provides a theoretical value assuming constant payments and rate. Actual results may vary due to changing rates, fees, or payment amounts.