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FV Ordinary Annuity Formula:
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The Future Value (FV) of an ordinary annuity calculates the total value of a series of equal payments made at the end of each period, considering compound interest. It helps determine how much a series of regular investments will be worth in the future.
The calculator uses the FV ordinary annuity formula:
Where:
Explanation: The formula calculates the accumulated value of all payments plus the compound interest earned on each payment until the end of the investment period.
Details: Calculating future value is essential for retirement planning, investment analysis, loan amortization, and financial decision-making. It helps investors understand the potential growth of regular contributions over time.
Tips: Enter the periodic payment amount in dollars, interest rate per period as a decimal (e.g., 0.05 for 5%), and the number of periods. All values must be positive numbers.
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 due to earlier compounding.
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 with 6% annual rate, use 0.06/12 = 0.005 as the periodic rate.
Q3: What if the interest rate is zero?
A: When r = 0, the formula simplifies to FV = PMT × n (simple multiplication of payment by number of periods).
Q4: Can this calculator handle different compounding frequencies?
A: Yes, ensure the interest rate and number of periods match the compounding frequency (monthly, quarterly, annually, etc.).
Q5: How accurate is this calculation for real-world investments?
A: This provides a mathematical estimate. Actual returns may vary due to market fluctuations, fees, and changing interest rates.