1. What is Annuity Due Future Value?

An annuity due is a series of equal payments made at the beginning of consecutive periods. The future value of an annuity due calculates what these periodic payments will be worth at a future date, considering compound interest.

2. How Does the Calculator Work?

The calculator uses the annuity due future value formula:

Where:

• \( FV \) — Future value of the annuity due
• \( PMT \) — Periodic payment amount
• \( r \) — Periodic interest rate (in decimal)
• \( n \) — Number of periods

Explanation: The formula accounts for each payment compounding for one additional period compared to an ordinary annuity.

3. Importance of Future Value Calculation

Details: Calculating future value helps in financial planning for retirement savings, loan payments, or any scenario involving regular investments with compounding returns.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between annuity due and ordinary annuity?
A: Annuity due payments occur at the beginning of each period, while ordinary annuity payments occur at the end. Annuity due has higher future value due to extra compounding period.

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

Q3: Can this be used for loan calculations?
A: Yes, it can calculate the future value of regular loan payments, though most loans use present value calculations.

Q4: What if payments change over time?
A: This formula assumes constant payments. For variable payments, each payment must be calculated separately.

Q5: How does inflation affect these calculations?
A: The future value is nominal. For real value, adjust the interest rate by subtracting expected inflation.