Future Value Of Annuity Calculator
The Future Value of Annuity Calculator can be used to find the future value of a set of equal cash flows at a particular date.
future value of annuity calculator
Type of Annuity
Table of contents
|◦What is an annuity?|
|◦Different types of annuities|
|◦How do you use our annuity calculator|
What is an annuity?
An annuity is a type of financial construction that includes a series of payments over a specified period. The flow of money can be in any direction (i.e. the money being paid directly to you or the money being paid to someone else). Annuities must meet two conditions. The payments are equal and made at regular intervals. A 10-year annuity is, for example, 200 dollars at the end of each of the next ten years.
When you deal with an annuity there are two things to consider: the current as well as the future value of the annuity.
Different types of annuities
Annuities can be classified in many ways. A life annuity is a type of annuity that pays for the remainder of the buyer's (or the beneficiary's) life. This type of annuity can only be paid in certain circumstances. It is also known as a contingent (i.e. it is dependent on the length of time that the annuitant is alive). We call it a guaranteed or certain annuity if the contract clearly specifies the time period.
Variability in payments is another distinguishing feature of annuities. There are fixed annuities where the payments are consistent, but there are also variable Annuities that allow you to accumulate the funds and then invest the proceeds on a tax-deferred basis. There are also equity-indexed annuities where the payments are linked with an index.
Annuities can be distinguished from present-day calculators by the timing of payments.
There are two types of annuities in this context:
An ordinary annuity or deferred annuity: Payments are made at the end of the period - student loans, mortgages, car loans, and mortgages are all conventionally ordinary annuities.
Annuity due: Payments are made at each period's beginning - rent lease payments, life and insurance premiums, and lottery payouts (if you're lucky enough to win one!)
It is easiest to see the differences between these types by using a simple example. Let's say you make 100 annual deposits of $100 for three years. The interest rate is 5%. You have a $100 3-year, 5% annuity.
Payment Amount = 100 dollars
Interest Rate = 5%
Annuity Term = 3 years
How do you use our annuity calculator
We hope you found the following section helpful in understanding how an ordinary annuity works. To solve more complex financial problems, you can use our future value calculator. This section explains how to use the calculator and provides a mathematical background.
Let's start by taking a look at some of the terms and parameters that you might encounter in our calculator.
The payment amount (PMT ) refers to the cash flow (cash flow) that was paid in or out for each period.
The annual nominal interest rate (r) can be expressed in percentages.
The annuity's term is the duration of the annuity.
The frequency of compounding (m) is the number of times interest is compounded. If compounding is applied every year, m=1, m=4, and m=12 respectively. The frequency can be continuous, which is the extreme form and theoretical limit for compounding frequency. In this case, m=infinity.
Payment frequency (q) indicates how frequently payments will be made.
An annuity type (T) indicates the time of payment for each payment period. (Ordinary annuity: End of each payment period; annuity Due: Beginning of each payment period.
Future Value of Annuity (FVA). The future value of any cash flows (payments) of present value.
We will now provide an overview of the calculations involved.
These are the two most basic annuity formulas:
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Future Value Of Annuity Calculator English
Published: Tue Jul 12 2022
In category Financial calculators
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