Dr. Vance specializes in time value of money, complex annuity structures, and retirement savings planning.
The **Future Value of Annuity Due Calculator** is essential for determining the total value of periodic payments (like rent or early retirement contributions) that are made at the **beginning** of each period. This versatile calculator solves for any missing input: **Future Value ($FV$)**, **Periodic Payment ($PMT$)**, **Interest Rate ($R$)**, or the **Number of Periods ($N$)**. **Input any three of the four core variables** to find the missing one.
Future Value of Annuity Due Calculator
Future Value of Annuity Due Formulas
The calculation is based on the Future Value of an Ordinary Annuity (FVOA) formula, multiplied by a “due” factor of $(1+r)$ to account for the beginning-of-period payment.
Note: $r$ is the decimal rate per period ($R_{percent}/100$).
Formula Source: Investopedia: Annuity Due
Variables Explained
The calculation relies on these four core Time Value of Money variables:
- Future Value (FV): The accumulated value of the payments at the end of the term ($).
- Periodic Payment (PMT): The constant payment made at the beginning of each period ($).
- Interest Rate (R): The annual or periodic compound interest rate (%).
- Number of Periods (N): The total number of compounding periods (e.g., months, years).
Related Calculators
Plan your savings and investments using related future value tools:
- Future Value of Ordinary Annuity Calculator
- Present Value of Annuity Due Calculator
- Future Value of Single Sum Calculator
- Compound Annual Growth Rate Calculator (CAGR)
What is Future Value of Annuity Due?
An **Annuity Due** is a series of equal payments made at the **beginning** of each period (e.g., rent, insurance premiums, or deposits made on the first day of the month). The Future Value of Annuity Due (FVAD) calculates what the total accumulation will be at the end of the investment period, crucially including one extra period of compounding interest compared to an ordinary annuity, because the payments start earning interest immediately.
This method is typically used for savings and investment vehicles where contributions are made upfront, maximizing the time the money has to grow through compounding. It is a more accurate model for many common financial scenarios than the ordinary annuity calculation.
How to Calculate FVAD (Example)
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Identify Components:
You deposit $\mathbf{PMT}$ of $\mathbf{\$1,000}$ at the beginning of each year. The $\mathbf{R}$ is $\mathbf{6\%}$ per year for $\mathbf{N}$ of $\mathbf{10\ years}$.
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Convert Rate to Decimal:
The rate per period as a decimal is $\mathbf{0.06}$.
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Apply the Formula:
$$ FV = \$1,000 \left[ \frac{(1+0.06)^{10} – 1}{0.06} \right] (1+0.06) $$
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Determine the FV:
The Future Value $\mathbf{(FV)}$ is approximately $\mathbf{\$13,971.64}$. The total interest earned is $\mathbf{\$3,971.64}$ (Total payments were $\$10,000$).
Frequently Asked Questions (FAQ)
A: The main difference is the timing of the payment. Annuity Due payments occur at the **beginning** of the period, allowing the money to earn interest for one extra period. Ordinary Annuity payments occur at the **end** of the period.
A: Because each payment in an Annuity Due is deposited one period earlier, it benefits from one additional compounding cycle, resulting in a higher total Future Value than an equivalent Ordinary Annuity.
A: Yes, if your contributions are deducted from your paycheck and invested immediately (at the beginning of the period), the Annuity Due model is generally the most accurate method for projecting retirement savings growth.
A: If the rate (R) is zero, the FV is simply the total amount paid: $FV = PMT \times N$. The calculator handles this edge case by direct multiplication.