Future Value- Growing Annuity

The Future Value of a Growing Annuity ( FVGA ) calculator computes the future value of a series of payments that accrue at a proportionate rate.  It is also known as the increasing annuity.

INSTRUCTIONS: Choose the preferred units and enter the following:

• (P) Amount of First Payment
• (r) Interest Rate per Period
• (g) Growth Rate of Contributions
• (n) Number of Periods

Future Value (FV_GA): The calculator returns the Future Value of the Growing Annuity (FVGA) in U.S. dollars.  However, this can be automatically converted to other currency units via the pull-down menu.

The Math / Science

The future value of an annuity formula assumes that

1. The rate does not change
 2. The first payment is one period away
 3. The periodic payment does not change

EXAMPLE

Ms. Abrianna, a freshman college student, decides to save $50 dollars of her work-study payment per month for a year.  She expects to make a 6% increase in her savings each year and therefore she wants to open a bank account at the end of her first year that gives 8% per annum. What will be her savings balance at the end of the fourth year?

Solution. At the end of the first year, Ms. Abrianna had saved $600 (50*12), which becomes her first payment (in the calculator above). The rate of return in 8% while the growth rate is 6% and the number of payments is 3 years (remember that she'll be banking at the end of the first year).  Therefore, her savings at the end of the fourth year will be $ 2060.88