1. What is an Ordinary Simple Annuity?

An ordinary simple annuity is a series of equal payments made at the end of consecutive periods over a fixed length of time. It's the simplest form of annuity calculation where interest is not compounded.

2. How Does the Calculator Work?

The calculator uses the simple annuity formula:

Where:

• \( FV \) — Future Value of the annuity ($)
• \( PMT \) — Payment amount per period ($)
• \( n \) — Number of payment periods

Explanation: This formula calculates the total value of all payments made without considering interest or compounding.

3. Importance of Annuity Calculations

Details: Understanding simple annuities is fundamental to financial planning, loan calculations, and understanding more complex annuity types.

4. Using the Calculator

Tips: Enter the payment amount in dollars and the number of periods. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound annuity?
A: Simple annuity doesn't account for interest, while compound annuity includes interest earned on payments.

Q2: When is simple annuity used?
A: It's used when interest is negligible or when calculating just the sum of payments without growth.

Q3: What are common examples of simple annuities?
A: Regular savings deposits without interest, certain types of installment payments, or basic lease agreements.

Q4: How does this differ from an annuity due?
A: Annuity due has payments at the beginning of each period, while ordinary annuity has payments at the end.

Q5: What are the limitations of simple annuity?
A: It doesn't account for time value of money or interest, making it less useful for long-term financial planning.