# What is the future value of ordinary annuity?

**ordinary annuity**is a series of payments made at the end of each period in the series. Therefore, the formula for the

**future value**of an

**ordinary annuity**refers to the

**value**on a specific

**future**date of a series of periodic payments, where each payment is made at the end of a period.

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Likewise, what is the formula for future value of an ordinary annuity?

The basic **equation** for the **future value** of an **annuity** is for an **ordinary annuity** paid once each year. The **formula** is F = P * ([1 + I]^N - 1 )/I. P is the payment **amount**. I is equal to the interest (discount) rate.

Secondly, how do you find the value of an ordinary annuity? For example, if an **ordinary annuity** pays $50,000 per year for five years and the interest rate is 7%, the present **value** would be: Present **Value** = $50,000 x ((1 - (1 + 0.07) ^ -5) / 0.07) = $205,010.

**They are:**

- PMT = the period cash payment.
- r = the interest rate per period.
- n = the total number of periods.

Correspondingly, what is the future value of an annuity?

While it is unlikely to be your sole source of cash during retirement, it can effectively supplement your IRA or 401(k). The **future value of an annuity** calculation shows what the payments from an **annuity** will be **worth** at a specified date in the **future**, based on a consistent rate of return.

Why the future value of an annuity due is greater than the future value of an ordinary annuity?

Since payments are made sooner with an **annuity due than** with an **ordinary annuity**, an **annuity due** typically has a **higher** present **value than** an **ordinary annuity**. When interest rates go up, the **value of an ordinary annuity** goes down. On the other hand, when interest rates fall, the **value of an ordinary annuity** goes up.