Future Value of an Ordinary Annuity

Here is the formula for the future value of an
ordinary annuity (payments at end):

S = R · [

 ( 1 + i )n - 1
----------------
i		 ]

  S is the future value of the annuity,
  R is the amount of the regular payment per period,
  n is the total number of payment periods
        (number of payment periods per year * number of years,
  i is the interest rate per period
        (annual interest rate written as a decimal ÷ number of periods per year )


R =

annual interest rate (as a decimal!!) =

number of payment periods per year =

number of years =

i =

n =


 
S =
 

Example: Suppose I pay $200 per month at 4.5% annual interest for 11 years into a retirement account. How much will I have at the end of that time?
This is how you would put the values into the formula to work it out with a calculator:

S = 200 · [

 ( 1 + .045 / 12 )(12 * 11) - 1
--------------------------------
(.045 / 12)		 ]
 
= $34,078.94
 
If you enter the above numbers correctly on a calculator, you should get an answer for S of $34,078.74

Try entering those numbers in the appropriate spaces in the box above, press the "Calculate" button, and see if you get the correct answer. You can use this calculator to practice problems and make sure you are evaluating them correctly on your calculator.
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Created on ... Nov 18, 2009

Last updated on ... Nov 30, 2009