An ordinary annuity is a series of equal payments made at regular intervals. The future value of an ordinary annuity is the amount of money that will accumulate at the end of the annuity period.
The formula for calculating the future value of an ordinary annuity is:
FV = A * (1 + r)^n
where:
- FV is the future value of the annuity
- A is the annual payment
- r is the interest rate
- n is the number of years
For example, if you make annual payments of $1,000 at an interest rate of 5% for 20 years, the future value of your annuity will be $40,193.94.
FV = 1000 * (1+0.05)^20 = 40193.94
The future value of an ordinary annuity can be calculated using a financial calculator or a spreadsheet.
Here are some additional things to keep in mind about calculating the future value of an ordinary annuity:
- The future value of an annuity will increase as the annual payment increases.
- The future value of an annuity will increase as the interest rate increases.
- The future value of an annuity will increase as the number of years increases.
The future value of an ordinary annuity can be a valuable tool for planning for retirement or other long-term goals. By calculating the future value of your annuity, you can see how much money you will need to accumulate in order to reach your goals.