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Annuities: future value and present value
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Learn it An annuity is a series of equal regular payments. Future value: FV = R[(1 + i)ⁿ − 1]/i. Present value (e.g. how much a series of payments is worth today): PV = R[1 − (1 + i)⁻ⁿ]/i. Payments are at the end of each period.
Example: $200 deposited every month for 5 years at 6% per year compounded monthly.
- i = 0.005, n = 60.
- FV = 200(1.005⁶⁰ − 1)/0.005 ≈ $13 954.01.
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