1. What is the Annuity Formula?

The annuity formula calculates the future value of a series of equal payments made at regular intervals with compound interest. It's commonly used in retirement planning, loan calculations, and investment analysis.

2. How Does the Calculator Work?

The calculator uses the annuity formula:

Where:

• \( FV \) — Future Value of the annuity
• \( P \) — Periodic payment amount
• \( i \) — Interest rate per period (in decimal)
• \( t \) — Number of periods

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

3. Importance of Annuity Calculation

Details: Understanding the future value of annuities helps in financial planning, retirement savings strategies, and comparing different investment options.

4. Using the Calculator

Tips: Enter the periodic payment amount in dollars, interest rate as a decimal (e.g., 0.05 for 5%), and the 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 (i) and periods (t) must match the compounding frequency. For annual payments with monthly compounding, adjust accordingly.

Q3: Can this be used for loan calculations?
A: Yes, with adjustments. Loans typically use present value of annuity calculations rather than future value.

Q4: What if the interest rate is zero?
A: The formula simplifies to FV = P × t (total payments without growth).

Q5: How accurate is this for real-world scenarios?
A: It provides a mathematical ideal. Real-world results may vary due to changing rates, fees, or payment timing differences.