Future Value of Annuity Calculator

Investment Amount (A): Annual Interest Rate (%): Number of Periods (n):

What is FVA (Future Value of Annuity)

The future value of an annuity refers to the total value of a series of regular investments at a specific point in the future, taking into account compound interest. For example, imagine you invest $1,000 every month starting at age 24. The future value of an annuity helps you determine how much that money will grow to by the time you retire or reach a milestone age like 35. It’s a powerful tool for understanding how consistent investing can build significant wealth over time.

Method 1: Calculating Future Value Manually (The Long Way)

Let’s say you invest $10,000 each year for three consecutive years—starting in November 2025, then again in November 2026, and finally in November 2027. You're earning a 7% annual return on each investment. Now, let's calculate the total value of your investments by November 2027.

To do this, we’ll calculate the future value (FV) for each investment using the formula:

Future Value (FV) = Present Value (PV) × (1 + r)^n

Where:

• PV is the initial investment ($10,000 each year)

• r is the annual rate of return (7% or 0.07)

• n is the number of years the investment is held until November 2027

Here's how it works:

• For the investment made in November 2025, it will grow for 2 years, so n = 2

• For the investment in November 2026, it will grow for 1 year, so n = 1

• For the investment in November 2027, it won’t have time to grow, so n = 0

Now let’s calculate each:

• Future Value for November 2025 investment:

$10,000 × (1 + 0.07)^2 = $11,449

• Future Value for November 2026 investment:

$10,000 × (1 + 0.07)^1 = $10,700

• Future Value for November 2027 investment:

$10,000 × (1 + 0.07)^0 = $10,000

Total Future Value by November 2027:

$11,449 + $10,700 + $10,000 = $32,149

So, by the end of 2027, your total investment will have grown to $32,149.

However, manually calculating future value for many years can become tedious. That’s why we use the Future Value of an Annuity formula, which simplifies the process for consistent, recurring investments over time.

Method 2: Using the FVA Formula (The Easy Way)

In the previous example, we calculated the future value step by step. However, this method becomes increasingly difficult and time-consuming when applied over longer periods. To simplify the process, we’ll now use the Future Value of an Annuity (F.V.A.) formula, which allows us to calculate the future value directly.

Let’s revisit the same example, but this time, we’ll use the formal definition of the Future Value of an Annuity:

Future Value of Annuity (F.V.A.) = A × [{(1 + r)^n – 1} / r]

Where:

• A = $10,000 (the annual investment amount)

• n = 3 years

• r = 0.07 (annual interest rate)

Substituting the values:

F.V.A. = 10,000 × [{(1 + 0.07)^3 – 1} / 0.07]

F.V.A. = $32,149

As you can see, using the Future Value of an Annuity formula makes it much easier to determine the total future value of regular investments over time.

About the Author: Abhishek Lohar

Abhishek Lohar is currently pursuing a Bachelor of Commerce (B.Com) with a strong passion for personal finance and the stock market. Through fincalconline.online, he aims to break down complex financial topics into simple, easy-to-understand language. His goal is to share his learning journey and make financial literacy accessible to everyone.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial advice. Please consult with a qualified professional before making any investment decisions.

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