future value of an annuity
Definition
The future value of an annuity may be calculated based on a given yearly or monthly compound interest rate assuming the same dollar amount is invested each year. The equation for determining the future value in such circumstances is: FV = PV x (1+i)t. Where:
PV = present value, FV = future value, i = interest, and t = time.
For example, an annuity investment today of $200 (with an additional $200 invested each subsequent year) with a compound interest rate of 3% would have an approximate value of $2600 in ten years.
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