Future Value of an Annuity Due
A level stream of beginning-of-period payments accumulated to a future date. Solve for the future value or for the payment needed to reach a target.
FV of Annuity Due (Annual Compounding)
Calculates the future value of payments made at the beginning of each year.
When to use: Use when payments are made at the start of each period, like rent or insurance premiums.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| FVA | Future Value of Annuity Due | Total future value of beginning-of-period payments | $ |
| PMT | Payment | Periodic payment amount (paid at start of period) | $ |
| k | Interest Rate | Nominal annual interest rate | % |
| n | Number of Years | Time period in years | years |
Real-Life Examples
Example 1: Annual Insurance Premiums
You pay $3,000/year at the start of each year into a fund earning 6% for 20 years.
Given
Step-by-Step
For these inputs, Future Value of Annuity Due is $116,978.18 under the stated payment, compounding and accounting assumptions.
Example 2: Lease Payments Saved
A landlord saves $12,000/year (collected at start of year) at 5% for 10 years.
Given
Step-by-Step
For these inputs, Future Value of Annuity Due is $158,481.45 under the stated payment, compounding and accounting assumptions.
Frequently Asked Questions
An annuity due is a series of equal payments made at the beginning of each period, rather than the end. Rent, insurance premiums, and lease payments are common examples of annuities due.
Each payment in an annuity due is made one period earlier, giving it one extra period to earn interest. The future value of an annuity due equals the ordinary annuity value multiplied by (1 + k).
Use the annuity due formula whenever payments occur at the start of each period. Common situations include rent payments, insurance premiums, subscription fees paid in advance, and beginning-of-month savings deposits.
The calculator uses the finite zero-rate limit: an annuity’s value is payment times payment count; a solved payment is the target value divided by a positive payment count. Deferral has no effect at zero interest. Values require whole payment counts, even under continuous interest compounding.