Annuity Formula

The annuity formula below is often used in finance to calculate the final or future value of the annuity. It is also called the annuity factor formula or annuity payment formula or future value of annuity formula or the formula for present value of an annuity due. See Annuity calculation for how to derive this annuity formula. There are other annuity formulas but we are going to discuss fixed annuity formula only, not variable annuity formula.

Value of annuity formula

From the annuity calculation, we have:

The term in the big brackets is a geometric progression which we can simplify as follows. Let S be as follows:

Then

Therefore we have the annuity formula: