1. What is the Annuity Future Value Formula?

The annuity future value formula calculates the future value of a series of equal payments (annuity) made at regular intervals, considering compound interest. For quarterly payments, the annual rate is divided by 4 and the number of periods is multiplied by 4.

2. How Does the Calculator Work?

The calculator uses the annuity future value formula for quarterly payments:

Where:

• \( FV \) — Future value of the annuity
• \( PMT \) — Quarterly payment amount
• \( r \) — Annual interest rate (in decimal form)
• \( n \) — Number of years

Explanation: The formula accounts for quarterly compounding by adjusting both the interest rate and the number of periods.

3. Importance of Future Value Calculation

Details: Calculating the future value of an annuity helps in financial planning, retirement savings projections, and investment decision making.

4. Using the Calculator

Tips: Enter the quarterly payment amount in dollars, annual interest rate as a decimal (e.g., 0.05 for 5%), and number of years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ordinary annuity and annuity due?
A: This calculator assumes ordinary annuity (payments at end of period). For annuity due (payments at beginning), multiply result by (1 + r/4).

Q2: How does compounding frequency affect results?
A: More frequent compounding (quarterly vs. annually) results in higher future values due to more frequent interest application.

Q3: Can I use this for monthly payments?
A: No, this is specifically for quarterly payments. For monthly, you'd divide rate by 12 and multiply years by 12.

Q4: What if my payments increase over time?
A: This calculator assumes constant payments. For growing annuities, a different formula is needed.

Q5: How accurate is this calculation?
A: It's mathematically precise for fixed payments and constant interest rates, but real-world returns may vary.