The Future Value of an Ordinary Annuity calculator computes the future value (FV) of a fixed rate annuity based on a regular annuity payment, a fixed rate of return and a number of periods.
INSTRUCTIONS: Choose units and enter the following:
- (PMT) regular annuity payment
- (r) fixed interest rate of return period
- (t) number of periods defining the duration.
Future Value (FV): The calculator returns the Future Value in U.S. dollars. However, this can be automatically converted into other currency units (e.g Canadian Dollars) via the pull-down menu.
The Math / Science
The formula for the future value of an ordinary annuity is:
`FV=PMT * ( ((1+r)^t)/r − 1/r)`
where:
- FV = Future Value
- PMT = regular annuity payment
- r = percent rate of return per period
- t = number of periods.
This formula calculates the future lump-sum value of of an annuity paid in fixed payments (PMT) based on a fixed interest rate (r) over a number of payments (t). This formula could help an investor decide if they should accept a fixed payment of $20 each month for two years or $500 in a lump sum at the end of the two year period.
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