Economics Time Value Of Money Questions Long
The formula for calculating the future value of an annuity is as follows:
FV = P * [(1 + r)^n - 1] / r
Where:
FV = Future Value of the annuity
P = Periodic payment or cash flow
r = Interest rate per period
n = Number of periods
This formula assumes that the periodic payments are made at the end of each period and that the interest is compounded at the same frequency as the payment periods.
To calculate the future value of an annuity, you need to know the periodic payment or cash flow, the interest rate per period, and the number of periods. By plugging these values into the formula, you can determine the future value of the annuity.
It is important to note that the formula assumes a constant interest rate and consistent periodic payments throughout the annuity's duration. If the interest rate or payment amounts vary over time, a more complex formula or financial calculator may be required to accurately calculate the future value of the annuity.