The future value of a $900 annuity payment over five years with an 8% interest rate can be calculated using the following formula: FV = PMT x ((1 + r)^n – 1 / r). This equation has FV as the future value. PMT represents the amount of the annuity payment, and r the rate of interest. Calculating for these variables we get: FV = 900 x ((1 + 0.08)^5 – 1/0.08), which equals $4786.94.
The total value of the accumulated money after 5 years is $4786.94. Although the amount of money you receive each month will be higher, compounding interest is what increases your returns.
The future value of annuities is a useful tool for individuals who are establishing retirement plans and other types of investment strategies involving periodic payments, such as car or mortgage loans. Knowing what one’s investments are likely to produce in terms of profits gives them more control over their financial goals as they plan for their futures accordingly.