1. What is an Annuity with Compound Interest?

An annuity with compound interest is a series of equal payments made at regular intervals where each payment earns compound interest. This calculator computes the future value of such an annuity.

2. How Does the Calculator Work?

The calculator uses the annuity formula:

Where:

• \( FV \) — Future Value of the annuity
• \( PMT \) — Periodic payment amount
• \( r \) — Interest rate per period (in decimal)
• \( n \) — Number of periods

Explanation: The formula accounts for compound growth of each payment over the remaining periods until maturity.

3. Importance of Annuity Calculations

Details: Understanding annuity growth is crucial for retirement planning, loan amortization, and any financial scenario involving regular payments with interest.

4. Using the Calculator

Tips: Enter the periodic payment amount, interest rate per period (as decimal), and number of periods. All values must be positive.

5. Frequently Asked Questions (FAQ)

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. This calculator assumes ordinary annuity.

Q2: How does compounding frequency affect the calculation?
A: The rate (r) and periods (n) must match the compounding frequency (e.g., monthly payments need monthly rate and total months).

Q3: What if the interest rate is zero?
A: The formula simplifies to FV = PMT × n (simple multiplication of payment by number of periods).

Q4: Can this be used for loan calculations?
A: Yes, with adjustments. Loans typically calculate present value rather than future value.

Q5: How accurate is this for real-world scenarios?
A: It provides a mathematical ideal. Real-world results may vary due to rounding, fees, or rate changes.