What is the future value of annuity?
The future annuity value is the total value of the group of payments at some point in the future. Annuity is a number of payments or cash flows paid at regular intervals. An annuity issuer, which is usually an insurance company, will consider the future value of the annuity to determine the amount of payments. In order to inform if the annuity is a good investment, the investor must know the future value of the annuity to compare it to other available investments.
The calculation of the future value of annuity takes into account the time value of money, which is the concept that the amount of money currently has more than the same amount or a number of payments in the future. It is assumed that the money will earn interest if they are invested, which will be the current flat rate today greater than it would be in the future. The interest factor of the current value is used to calculate the amount of money of rny, this would be equal to a number of payments in the future. This is an inverse calculation for determining the future annual value.
Investor, which is considering storing a lump sum of money and to accept regular payments, would use the future value of the annual calculation to determine the total value of the payments to be accepted. The future value of normal annuity or the future value due would be used, depending on whether payments should be received at the beginning or end of the period. If the investor was offered a number of payments in the future, the current factor of income would use value to determine the one -off amount that would generate these payments.
Since the calculation for determining the future value or factor of the current value is relatively complex, the investor can use the calculator of the time value to reflect the future value of the annuity or factor of the current interest. Knowledge of the future value of annuity will allow the investor to determine whether the return on investment meets its investment objectives. Because annuity has advantages and disadvantages over other types of investment, such as stocks, mutual funds or CDs,It is useful to calculate the future value of the annuity to make an educated decision.