**Future value of an annuity, **

### Definition of Future value of an annuity:

Because of the time value of money, money received or paid out today is worth more than the same amount of money will be in the future. That's because the money can be invested and allowed to grow over time. By the same logic, a lump sum of $5,000 today is worth more than a series of five $1,000 annuity payments spread out over five years.

The future value of an annuity may be calculated based on a given yearly or monthly compound interest rate assuming the same dollar amount is invested each year. The equation for determining the future value in such circumstances is: FV = PV x (1+i)t. Where:

PV = present value, FV = future value, i = interest, and t = time.

For example, an annuity investment today of $200 (with an additional $200 invested each subsequent year) with a compound interest rate of 3% would have an approximate value of $2600 in ten years.

The future value of an annuity is the value of a group of recurring payments at a certain date in the future, assuming a particular rate of return, or discount rate. The higher the discount rate, the greater the annuity's future value.

### How to use Future value of an annuity in a sentence?

- The future value of an annuity is a way of calculating how much money a series of payments will be worth at a certain point in the future.
- In an ordinary annuity, payments are made at the end of each agreed-upon period. In an annuity due, payments are made at the beginning of each period.
- By contrast, the present value of an annuity measures how much money will be required to produce a series of future payments.

Meaning of Future value of an annuity & Future value of an annuity Definition