Annuity:  Future Value

-- Section 9.2 --

 
Annuity: Future Value

Annuity: Payment or Rent

 
  • FV = Future Value
  • P = Payment or Rent 
  • i =  r k,  r = is annual rate, k = number of periods per year
  • n = number of years

Compound Interest and Annuities Click  for Calculator
You decide to save for your child's college education by depositing $100 at the end of each month into a savings account paying 6% interest compounded monthly.  How much money will be in the account after 18 years?

Solve

       Step

i = 0.06 12 = 0.005 

k = 12, r = 0.06, Monthly means 12 times a year

P is payment = 100, n = 18 years

Find the Future Value

You would have $38,735.32 after 18 years. (before taxes)
Enter 100 ( (1 + 0.06 12 )  xy ( 12 18 ) - 1)   .005  [enter or =] in your calculator
Hint: don't round until you are completely finished with your calculations.

  
You decide to save for your child's college education by depositing $200 at the end of each month into a savings account paying 6% interest compounded monthly.  How much money will be in the account after 18 years?

[Solution]

You want to save $35,000 for a pool.   How much should you deposit each month with an annual rate of 3% for 5 years in order to save for the pool?

Solve

       Step

i = 0.03 12 = 0.0025 

k = 12, r = 0.03, Monthly means 12 times a year

FV is payment = 35,000, n = 5 years

Find the Future Value

P = 541.40

You make 60 equal payments of $541.40  in order to save $35,000.
Enter 35,000 .0025 ( (1 + 0.03 12 )  xy ( 12 5 ) - 1)   [enter or =] in your calculator
Hint: don't round until you are completely finished with your calculations.

You want to save $20,000 for a car.   How much should you deposit each month with an annual rate of 9% for 4 years in order to save for the car?

[Solution]

Tutorials and Applets by
Joe McDonald
Community College of Southern Nevada