1. What is an Ordinary Annuity Calculator?

Definition: This calculator computes the future value of a series of equal payments made at regular intervals with compound interest.

Purpose: It helps investors, retirees, and financial planners determine the growth of regular savings or investment contributions.

2. How Does the Calculator Work?

The calculator uses the ordinary annuity formula:

Where:

• \( A \) — Future value of the annuity (currency)
• \( P \) — Periodic payment amount (currency)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of compounding periods per year
• \( t \) — Time in years

Explanation: The formula accounts for compound interest over multiple payment periods.

3. Importance of Annuity Calculations

Details: Understanding annuity growth helps with retirement planning, loan amortization, and investment strategy decisions.

4. Using the Calculator

Tips: Enter the periodic payment amount, annual interest rate (as percentage), compounding frequency (default 12 for monthly), and time in years.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ordinary annuity and annuity due?
A: Ordinary annuity payments are made at the end of each period, while annuity due payments are made at the beginning.

Q2: How does compounding frequency affect results?
A: More frequent compounding (higher n) leads to slightly higher returns due to more frequent interest application.

Q3: What's a typical compounding frequency?
A: Monthly (12) is common for savings accounts, while quarterly (4) or annually (1) may be used for investments.

Q4: Can I use this for loan calculations?
A: This calculates future value; for loan payments, you'd need a present value annuity calculation.

Q5: Does this account for taxes or fees?
A: No, the calculation shows gross returns before any deductions.