Future Value Formula of an Annuity

Posted by Grace under Investing on September 26, 2014

Here is the future value formula of an annuity, asked by many of InvestmentTotal.com readers and visitors. This formula can be useful if you want to know how much will be your investment after few years or month especially if you are doing cost averaging.

Is it necessary to know or compute the future value of your investment? Whether you invest in stocks, mutual funds or UITF, be sure you have your goal and purpose why you are investing. Do not just invest because you read blogs or books that investing is the best way to grow your money.

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The formula below is easy to use, even though you are not a mathematician teacher. Here is the formula on how to calculate the future value of your investment.

I will give you a sample or an assignment today, if you can solve this problem then you can easily know the future value of your investments. Use calculator but follow the formula.

Future Value Formula of an Annuity

If Grace of InvestmentTotal.com will going to invest in the stock market amounting to P100,000 per year and invested for 20 years, she maintain her stocks to earn 18% annually, what is the future value of Grace stock investment after 20 years?

To use the formula;

FV means future value
pmt means payment
k means annual interest rate
n means number of payments

To solve the problem, it should be;

FV=?
pmt = P100,000
k = 18%
n =20

A. 14,662,797.00
B. 15, 665.880.50
C. 14,457,707.00

The answer is letter A. 

You can use this formula if you want to know if you get a good return on investment (ROI). In the situation above, Grace invested P2,000,000 but she got a 12, 662, 797.

Now you know how to calculate the future value of your investment by using the future value of an annuity. To make it easy for you to decide how much should you invest to acquire millions, please see the table with future value of a specific amount of money that earns different interest rates and investing in different years.

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