An annuity due is a series of equal payments made at the beginning of regular intervals. The future value of an annuity due is the amount of money that will accumulate at the end of the annuity period.
The formula for calculating the future value of an annuity due is:
FV = A * (1 + r)^n + A * (1 + r)^{n - 1} + ... + A * (1 + r)^1
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 due will be $45,062.49.
FV = 1000 * (1+0.05)^20 + 1000 * (1+0.05)^19 + ... + 1000 * (1+0.05)^1 = 45062.49
The future value of an annuity due 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 annuity due:
- The future value of an annuity due will be higher than the future value of an ordinary annuity with the same payments, interest rate, and number of years.
- The difference between the future value of an annuity due and an ordinary annuity will increase as the interest rate increases.
- The difference between the future value of an annuity due and an ordinary annuity will increase as the number of years increases.
The future value of an annuity due can be a valuable tool for retirement planning or other long-term financial planning. By calculating the future value of your annuity due, you can see how much money you will need to accumulate in order to reach your goals.