How to Calculate the Future Value of an Annuity

[@hermanlaurell6521]

Extremely helpful channel! I'm finishing my first year at university and my professors tend to do a really good job at complicating these topics even further. You're doing an amazing job at summarizing the key points to build a foundational understanding. Thank you!

[@ianforbes7286]

This is very helpful. I'm at University in the Uk and I have been trying to master the "Present value of £1.00 per annum" formula which is designed to make these same calculations but which I find very confusing. I need this technique for a presentation I have to give after the easter break. This method does the same job but is easier to understand.

[@jamesnarteh5363]

Must you always give an initial amount??

[@tasosm6185]

the formula FV=pmt[(1+r)^n-1/r] could have been used in case we didnt have PV?

[@ivanagrgic1]

Is it also possible to start with the first year with this calculation: 1000*(1+0.07)^1??

[@Alanisbusinessacademy]

Only if you were solving for the present value. Since we're solving for the future value, we need to compound the $1,000 earned at the end of the year 1 to see what it's worth at the end of year 5. Hope this clarifies.

[@SogMosee]

Why didnt you start with the 10,000 as year 0 and do the calculations from left to right? I dont understand.

[@Alanisbusinessacademy]

Doesn't make that much of a difference. Although it's easier from a space standpoint to start on the right side.

[@DLBcovers]

I noticed that too.

[@michaeldelyjah5696]

@@andreacastanedobrito8138 Because the 10,000 has been there from the beginning, year 0, so it has been gaining interest for 5 years. Doing it your way means that the 10,000 was inserted at the end of the 5th year, which means that it gained no interest at all. Doing your way is simply adding 10,000 to the final number after doing the math.

[@mariamalnaqbi3544]

why you always do it with years TT_TT , can you explain how to do it with days? please..

[@bigjayfitness]

can someone please tell me what the formula is assuming the pmts are equal? I don't want to do this for 25 payments...

[@Alanisbusinessacademy]

I would recommend using a financial calculator. However if you're going to calculate it by hand use the follow at the following website: www.investopedia.com/terms/f/future-value-annuity.asp

[@MrAni311]

Nicely done. insightful!!

[@thres34]

Why you didn't use formula instead of this long thing?

[@Alanisbusinessacademy]

+thres34 So the audience could see the process of compounding. Formulas are great shortcuts, but they're not helpful if you don't know what the formula is doing for you.

[@HelenKoutsi]

Great video but it would help if you specified what type of annuity you were referring to. Is this an ordinary annuity or an annuity due?

[@adriellejoseph16]

HelenKoutsi It is Ordinary Annuity.

[@debragriffiths4018]

is this for an ordinary annuity or annuity due?

[@koi5242]

I get 8,274.78 using by BA2 plus: PV: 10,000; I/Y: 7; PMT:1000; CPT:FV. Why?

[@PansyChoi]

FV=$1000[(1+7%)-1/7% , Why I use this formula then shows $5750.74, there’s different with your answer…Please help >

[@BiggPeople]

how to calculate rate of interest?????????? [if future value of annuity is given and present value time is also given]

[@alvydasjokubauskas2587]

What are the numbers given?

[@messerx10]

what about unequal payments with same interest rates? for both future and present value.. i got exams 3 days after this :D

[@alfredjohnson3642]

thanks man, where is the episode 39

[@Alanisbusinessacademy]

You're welcome Jose! You can find episode 39 here: kzbin.info/www/bejne/aYKWlYV3Ypmsg5o. I originally had it incorrectly listed as episode 38. Thanks for subscribing and helping me spot some errors :)

[@pravarjoshi118]

I thought for future value annuity problems, the PV is always 0...

[@chenyuxie2567]

In reality, the initial input of $10,000 will remain the same at the end of the fifth year as it's the condition of you getting annuity payments every year.

[@Alanisbusinessacademy]

This is certainly possible, but we're not looking at the distribution of the annuity payments in this question but the accumulation of investments. If you put $10,000 in a IRA or 401k it will not remain the same at the end of the 5th year. It will continue to grow as will your other contributions. Thus we need to determine the future value of that figure. Hope this helps to clarify.

[@chenyuxie2567]

Thanks for clarify. as well you should make the tutorial clear in what you mean.

[@Alanisbusinessacademy]

You're very welcome!

[@leilaa2009]

thank you

[@EmilyLeungesyl]

Life saver

[@hamzaguerfeli1118]

1000 ( 1+0.07)^0 isn't = 1000 ! is it ? a^0 = a don't forget :)