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