Annuity Payment Formula



Trying to figure out just how much you will make form that annuity isn't always as easy as you would think it should be. In fact the annuity payment formula can be one that is quite difficult to figure out. That is why at times it may be best when trying to decide what annuity you are hoping to purchase that you deal with a professional who can help you out the most. Not only will they be able to discuss with you just how much you can get back on the different annuity options that you have, but they can lead you to the best choice.



With the annuity you are going to be able to set up equal payments that will come to you for a specific time period. Normally that will be for a year, but there are other ways that you can set these up for a longer amount of time or even a shorter amount of time. Those payments that you get from the annuity are titled periodic rent.

While there is also an annuity due that is when you will get the payment at the beginning of the time period each time. While in the case of an ordinary annuity you are going to receive the payment at the end of that time period.

Considering in this formula you will need to see just how much the value will be in the future for both of these type of annuities too. But to put it in more simple terms let's look at this example where you place in $100 into a savings account, that pays you 6 percent each month compounded. At the end of 10 years you will have how much. Place it into the formula and you will get the answer, 100 * ((1+.005)120 -1)/.005 = $36,387.93 is what you will have after 10 years.
Now this will be different when you are looking at an ordinary annuity, but take the same amount of money that you would deposit. But this time it's at the end of the month not the beginning of the month. The additional amount of money that you will get is equal to this amount of 100(1.005)120-100= $81.94.