Annuity Calculator Online
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Annuity Calculator
Future Value of Annuity
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Understanding Annuities and Their Future Value
An annuity is a financial product involving a series of regular payments made over a set period. These payments can be for various purposes, such as saving for retirement, receiving lottery winnings, or as part of an insurance policy. The "future value" of an annuity is the total worth of these future payments at a specific point in time, assuming a constant interest rate. This calculation is crucial for financial planning, allowing individuals and businesses to estimate the growth of their investments or the total payout they can expect.
How the Annuity Future Value is Calculated
The calculation depends on whether it's an "ordinary annuity" (payments made at the end of each period) or an "annuity due" (payments made at the beginning of each period).
Formula for Ordinary Annuity:
FV = P * [((1 + r)^n – 1) / r]
- FV = Future Value of the Annuity
- P = Periodic Payment Amount
- r = Interest rate per period (annual rate divided by the number of compounding periods per year)
- n = Total number of periods
Formula for Annuity Due:
FV = P * [((1 + r)^n – 1) / r] * (1 + r)
Notice that the formula for an annuity due is the same as an ordinary annuity, multiplied by (1 + r), because each payment earns interest for one additional period.
In this calculator, we assume interest is compounded annually, so r is the annual interest rate and n is the number of years.
Use Cases for an Annuity Calculator:
- Retirement Planning: Estimate how much your regular retirement contributions will grow over time.
- Investment Analysis: Compare different investment options that offer regular payouts.
- Lottery Payouts: Understand the total value of a lottery prize paid out in installments.
- Savings Goals: Project the future value of consistent savings deposits.
- Loan Amortization (Reverse View): While this calculator focuses on future value, understanding annuities is foundational to loan calculations where payments are made over time.
Using this calculator helps demystify complex financial calculations, empowering users to make more informed decisions about their savings and investments.
function calculateAnnuity() {
var paymentAmount = parseFloat(document.getElementById("paymentAmount").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var numberOfPeriods = parseInt(document.getElementById("numberOfPeriods").value);
var annuityType = document.getElementById("annuityType").value;
var resultElement = document.getElementById("annuityResult");
// Clear previous result if inputs are invalid or empty
if (isNaN(paymentAmount) || isNaN(interestRate) || isNaN(numberOfPeriods) || paymentAmount <= 0 || interestRate < 0 || numberOfPeriods <= 0) {
resultElement.textContent = "–";
return;
}
var periodicRate = interestRate / 100; // Convert annual rate to decimal
var futureValue;
if (annuityType === "ordinary") {
// Formula for Ordinary Annuity
// FV = P * [((1 + r)^n – 1) / r]
if (periodicRate === 0) {
futureValue = paymentAmount * numberOfPeriods;
} else {
futureValue = paymentAmount * (Math.pow(1 + periodicRate, numberOfPeriods) – 1) / periodicRate;
}
} else { // annuityType === "due"
// Formula for Annuity Due
// FV = P * [((1 + r)^n – 1) / r] * (1 + r)
if (periodicRate === 0) {
futureValue = paymentAmount * numberOfPeriods;
} else {
futureValue = paymentAmount * (Math.pow(1 + periodicRate, numberOfPeriods) – 1) / periodicRate * (1 + periodicRate);
}
}
// Format the result to two decimal places
resultElement.textContent = "$" + futureValue.toFixed(2);
}