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Future Worth of Annuity Formula:
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The Future Worth of an Annuity is a financial metric that represents the total value of a series of equal cash flows or payments received or paid at regular intervals over time, considering the time value of money.
The calculator uses the Future Worth of Annuity formula:
Where:
Explanation: This formula calculates how much a present annuity amount will grow to in the future, considering compound interest over multiple periods.
Details: Calculating future worth helps in financial planning, investment analysis, retirement planning, and comparing different investment opportunities by understanding how money grows over time with compound interest.
Tips: Enter present annuity amount in dollars, interest rate as a decimal (e.g., 0.05 for 5%), and number of interest periods. All values must be positive numbers.
Q1: What's the difference between present and future worth of annuity?
A: Present worth represents the current value of future cash flows, while future worth shows what those cash flows will be worth at a future date after accounting for compound interest.
Q2: How does compound interest affect future worth?
A: Compound interest causes money to grow exponentially over time, as you earn interest on both the principal amount and accumulated interest from previous periods.
Q3: What are typical applications of this calculation?
A: Retirement planning, investment analysis, loan amortization, and comparing different financial products and investment opportunities.
Q4: How does the interest rate affect the future worth?
A: Higher interest rates result in significantly higher future worth due to the compounding effect, especially over longer time periods.
Q5: Can this formula be used for monthly compounding?
A: Yes, but you need to ensure the interest rate and number of periods are consistent (e.g., use monthly rate and monthly periods).