 
Calculating the Future Value of an Annuity
The basic steps in calculating the future value of an annuity are as follows:
 Enter the proper payments per year. You first must type in the appropriate
number (eg. monthly would be 12, quarterly would be 4, etc.), then push the
cream colored key , then
the P/YR key.
 The order of the next three steps is not important, but I recommend that
you follow across the financial tour of your calculator from left to right.
If you do this, then the next step would be to enter in the proper number of
years. You first type the appropriate number, then push the cream colored
key , then the xP/YR
key.
 Now enter the appropriate interest rate per year. This is done by entering
the appropriate annual interest rate as a whole number, not as a decimal
(the calculator will convert it to decimal automatically), then pressing the
I/YR key.
 Next enter the amount of the annuity (the payment that occurs every
period) and press the PMT
key.
 Finally all that is necessary is push the FV
key.
Now let's try a problem. Consider that you invest $1000 in a bank account at
the end of every year for 3 years. The bank will pay 8% annual interest on the
deposits. How much would your bank account be worth at the end of the three
years?
First let's see what we know. We know that there will be three deposits of $1000
at the end of each year for three years. That indicates that the payment (PMT)
is $1000 since it is a recurring payment every period. We know that the number
of years is 3. We know that the annual interest rate is 8% (8 is the I/YR).
Finally, we may assume that the periods per year is one since we are not told it
is monthly, quarterly, etc. (If the payments per year would have been, for
example, monthly, the problem would have read, ". . . pay 8% annual
interest, compounded monthly.")
Now let's compute the problem:
 First we must enter the appropriate payments per year by pushing 1, then
the P/YR key.
 Next we will enter the number of years by pushing 3, then the cream
colored key , then the
xP/YR key.
 Now we will enter the interest rate per year by pushing 8 and then
pressing the I/YR key.
 Next we enter the Payment by pressing 1000, then the
key (to show that this is paid to the bank), and then the PMT
key.
 Finally, we press the the FV
key to compute the answer. The display then shows 3246.40 if the display was
set to show two decimal places. Note that the answer is positive.
This indicates that the direction of the cash flow is in. (This is logical
since we pay $1000 per year in order to receive $3,246.40 in the future.)
Would you like to review the
mathematics of this calculation?
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