1. What is the Future Value of an Ordinary Annuity?

The Future Value of an Ordinary Annuity calculates the total value of a series of equal payments made at the end of each period, considering a fixed interest rate. It helps in financial planning for retirement savings, loan repayments, and investment growth projections.

2. How Does the Calculator Work?

The calculator uses the Future Value of Ordinary Annuity formula:

Where:

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

Explanation: The formula calculates the accumulated value of regular payments with compound interest, assuming payments are made at the end of each period.

3. Importance of Future Value Calculation

Details: Accurate future value estimation is crucial for retirement planning, investment analysis, and understanding the long-term growth potential of regular savings contributions.

4. Using the Calculator

Tips: Enter the periodic payment in dollars, interest rate per period (as a decimal), and number of periods. All values must be positive numbers.

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, resulting in slightly higher future values for annuity due.

Q2: How do I convert annual rate to periodic rate?
A: Divide the annual rate by the number of periods per year. For monthly payments, divide annual rate by 12.

Q3: What if the interest rate is zero?
A: When rate is zero, future value is simply the sum of all payments (PMT × n).

Q4: Can this be used for irregular payments?
A: No, this formula assumes equal periodic payments. Irregular payments require different calculation methods.

Q5: How does compounding frequency affect the result?
A: More frequent compounding increases future value. Ensure the interest rate matches the compounding period.