FV of Ordinary Annuity
Calculates the future value of periodic payments with m-period compounding.
When to use: Use for monthly or quarterly savings plans.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| FVA | Future Value of Annuity | Total future value of all payments | $ |
| PMT | Payment | Periodic payment amount | $ |
| k | Interest Rate | Nominal annual interest rate as a decimal | % |
| n | Number of Years | Time period in years | years |
| m | Compounding Frequency | Compounding periods per year | integer |
Real-Life Examples
Example 1: Monthly 401k Savings
You invest $500/month at 7% compounded monthly for 25 years.
Given
Step-by-Step
Monthly $500 contributions grow to $405,035.39 over 25 years.
Example 2: Quarterly Investment
Invest $1,000/quarter at 6% compounded quarterly for 15 years.
Given
Step-by-Step
Quarterly investments grow to $96,214.65 over 15 years.
Frequently Asked Questions
Divide the annual interest rate by 12 for the monthly rate, and multiply the number of years by 12 for total months. Then apply the future value of annuity formula with these adjusted values.
Monthly contributions grow more because each deposit starts earning interest sooner. With 12 deposits per year instead of one, more money is working for you throughout the year, resulting in more compounding.
Yes. Set m to 26 for biweekly contributions (or 24 for semi-monthly). Divide the annual rate by m and multiply years by m to get the correct periodic rate and total number of payments.