Calculate Annuity Payment – Funding an Annuity

Posted by Professor Cram in Annuities

Annuities and Annuity Payments

Many people add to a retirement account at regular intervals through payroll withholding. You may have a savings goal. Solving for an annuity payment is one way to figure out how much you should be saving in order to meet your goal. First, let’s define our terms.

An annuity is a stream of payments made through time. A stream of equal payments at equal time intervals is a fixed annuity. If those payments are made at the end of each time period (month, quarter, year, etc…) it is an Ordinary Annuity. If the payments are due at the beginning of each period, it is an Annuity Due.

The payment amount, interest rate, and number of payments all contribute to the future value of the annuity. Any annuity calculation has these four variables, and with any three you can find the fourth.

The formula and example below calculates the periodic payment required for an ordinary annuity, with a given interest rate and number of payments (periods), in order to achieve a desired future value. This assumes a starting value of zero.

This formula can also be manipulated to calculate the payments from an existing sum, which would find the payouts that would draw the annuity down to an ending value of zero.

Formula to Calculate the Payment Amount of an Ordinary Annuity

PMT = FV(OA) / [((1 + i)n - 1) / i ] where:

  • FV(OA), or Future Value of Ordinary Annuity: the value of the annuity at time t=0
  • PMT: Payment amount (value) of the individual payments in each period
  • i: periodic interest rate that gets compounded for each period of time(periodic rate may be determined by dividing an annual rate by the number of periods in a year)
  • n: number of peroids (same as the number of payments)

Calculate Annuity Payment: Funding an Ordinary Annuity

Calculate the payment required for an ordinary annuity with a step by step example using your values for the periodic interest rate, number of periods, and future value.

The Flash plugin is required to view this object.



7 Responses to “Calculate Annuity Payment – Funding an Annuity”

  1. Carolyn Burns says:

    I am 50 years old and will retire in 10 years. I expect to live for 25 years after retirement, until I am 85. I wants a fixed retirement income that has the same purchasing power at the timeI retire as $50,000 has today. (The real value of his retirement income will decline annually after I retires.) My retirement income will begin the day I retire, 10 years from today; and I will then receive 24 additional annual payments. Annual inflation is expected to be 5%. I currently have $125,000 saved, and I expect to earn 10% annually on my savings. How much must I save during each of the next 10 years (end-of-year deposits) to meet his retirement goal?

  2. bandage dress sammydress promo says:

    Celebrity garments can be selected for any time, gender, circumstance etc.

    Militants dress themselves up in camouflage coats in such a way that it is hard to distinguish
    them from the surroundings. Now, in reality, Jiang Hao
    has been arranged outside the site in their own good wind and rain do not
    care through the Alexander matrix, it can barely be regarded as a certain power of self-protection, but Jiang Hao was also
    not at all to relax this principle.

    Feel free to surf to my web site – bandage dress sammydress promo

  3. market cash gift says:

    Many people advertise affiliate marketing as something that can be
    started for fairly cheap. Many webmasters, or even just bloggers, have come to use
    the capabilities of SEO to increase the quality
    and quantity of visitors visiting their website or blogs.
    Stick with the one that seems to have the greatest response.

    Feel free to visit my webpage market cash gift

  4. spray tanning bar equipment and supplies says:

    Several artificial tanning solutions are available in the market sue to which sun tanning is not all required.
    Relentless was now full of “old” players who weren’t
    interested in playing, but were interested in keeping the
    power. Contact with eyes can result in extreme irritation,
    which can even be serious.

    Stop by my site – spray tanning bar equipment and supplies

  5. white jacobs says:

    The way business is conducted needs to change drastically. We need to get rid of this “for profit” mentality and get back to doing what’s right first.

  6. Floyd says:

    The price of using this is usually more expensive than that of the low
    pressure. Consequently it may be that you want to
    locate a Manchester salon where you know a luxurious experience awaits and you can relax to your heart’s content.
    Pink Parlour Manila is the rebellious sister of beauty salons
    owned by Ms. As a user, you need to evaluate both before making a final choice.
    They could be used 12 months round or essentially to get a relatives vacation as nicely as journey.
    convenience, effortlessness, and consultation with an expert who may be
    able to recommend the right formula tan for your skin tone.

    There are those who have grown up in the heat and developed a resistance to this,
    but it isn’t for everyone. I guess it’s not just the tan people
    are looking to get it is also the fun process. sees names of
    clinic as her first basis in creating an opinion. During the initial shower, much of
    the bronzer will be washed away and the skin will be left with a healthy tan.

  7. says:

    Greeting card templates which come with licenses
    often limit the changes to be made, thereby making customization difficult.
    So, your 60th birthday gifts should be able to convey this special affection as
    well. Gift certificates and corporate charge accounts are also available.

Leave a Reply

Get More Help!

Click one of these links to get more help from another Cramlet in this same chapter: