How to Apply Future Value of an Annuity Formula in Excel

This article will describe 2 easy methods to apply the Future Value of an Annuity Formula in Excel.

Introduction to Annuity

An Annuity is a financial product that refers to a series of successive equal payments, either received or paid. It continues for a specific number of periods, with payments spaced equally in time. Accordingly, the Future Value of an Annuity means the value of this series of payments at some date in the future. The future value of annuity can be of two types:

• Future Value of Ordinary Annuity
• Future Value of Annuity Due

The Future Value of Ordinary Annuity is a repeating payment made at the end of each period, whereas the Annuity Due requires the payment at the beginning of each period.

How to Apply Future Value of an Annuity Formula in Excel: 2 Easy Ways

We’ll use 2 methods to find the future value of an annuity in Excel: using a built-in Excel function, and creating a formula manually. To illustrate, we’ll use the dataset below, representing a fixed Payment amount ($5,500), Interest Rate (7.3%), and the number of Periods (24).

Method 1 – Using the FV Function to Get the Future Value of an Annuity

The FV function returns the future value of an investment. To get the value, we need to input the interest rate, the number of periods to pay the installments, and the fixed payment amount. We’ll find the Future Value for both Annuity types.

1.1 – Regular Annuity

First, we’ll calculate the future value of the Regular Annuity.

Steps:

• Select cell C9.
• Enter the following formula:

• Press Enter.

The precise output is returned.

Read More: How to Calculate Future Value of Growing Annuity in Excel

1.2 – Annuity Due

Now we’ll find out the future value of the Annuity Due.

Steps:

• Select cell C9.
• Enter the following formula:

• Return the result by pressing Enter.

The accurate annuity due value is returned.

Read More: How to Calculate Future Value in Excel with Different Payments

Method 2 – Find the Future Value of an Annuity Manually with a Simple Formula

Alternatively, we can also create a simple formula manually by following the annuity equation.

2.1 – Ordinary Annuity

Firstly, we’ll use the equation:

Ordinary Annuity = P * [(1 + i)n – 1] / i

Where,

P = Payment

i = Rate of Interest

n = Periods

Steps:

• Select cell C9.
• Enter the following formula:

• Press Enter.

The future value of the ordinary annuity is returned.

Read More: How to Apply Present Value of Annuity Formula in Excel

2.2 – Annuity Due

Similarly, for the Annuity Due we’ll execute the formula:

Annuity Due = P * [(1 + i)n – 1] * (1 + i) / i

Steps:

• Select cell C9.
• Enter the following formula:

• Press Enter.

The annuity due is returned.

Read More: How to Calculate Present Value of Uneven Cash Flows in Excel

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