1. What is Future Value of Annuity?

The Future Value of an Annuity calculates how much a series of equal payments made at regular intervals will be worth at a future date, given a specified interest rate. It's commonly used for retirement planning, savings goals, and investment analysis.

2. How Does the Calculator Work?

The calculator uses the Future Value of Annuity formula:

Where:

• \( FV \) — Future Value (USD)
• \( PMT \) — Periodic payment amount (USD)
• \( r \) — Interest rate per period (decimal)
• \( n \) — Number of payment periods (unitless)

Explanation: The formula accounts for compound interest on each payment over its remaining time period.

3. Importance of Future Value Calculation

Details: Understanding the future value of annuity payments helps in financial planning, comparing investment options, and setting realistic savings goals.

4. Using the Calculator

Tips: Enter the periodic payment amount in USD, interest rate per period as a decimal (e.g., 0.05 for 5%), and the 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: This calculator assumes ordinary annuity (payments at end of period). For annuity due (payments at beginning), multiply result by (1 + r).

Q2: How does compounding frequency affect results?
A: Ensure the interest rate matches the payment period (e.g., monthly payments need monthly rate, not annual).

Q3: What if payments increase over time?
A: This formula assumes constant payments. For growing annuities, a different formula is needed.

Q4: Can this be used for loan calculations?
A: Yes, but typically loans use present value of annuity formulas instead.

Q5: How accurate is this calculation?
A: It's mathematically precise, assuming constant rate and payments. Real-world results may vary with changing rates.