1. What is an Annuity Calculator?

Definition: This calculator computes the future value of an annuity investment based on compound interest.

Purpose: It helps students and investors understand how investments grow over time with compound interest.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( A \) — Future value of investment (currency)
• \( P \) — Principal investment amount (currency)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of compounding periods per year
• \( t \) — Time the money is invested (years)

Explanation: The formula calculates how an initial investment grows with compound interest over time.

3. Importance of Annuity Calculations

Details: Understanding compound interest helps with financial planning, investment decisions, and retirement savings.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (as decimal), compounding frequency, and investment period in years.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Compound interest earns interest on both principal and accumulated interest, while simple interest only earns on principal.

Q2: How does compounding frequency affect results?
A: More frequent compounding (higher n) yields greater returns due to the compounding effect.

Q3: Should the rate be entered as percentage or decimal?
A: Enter as decimal (e.g., 5% = 0.05).

Q4: What's a typical compounding frequency?
A: Common frequencies are 1 (annually), 12 (monthly), or 365 (daily).

Q5: Can this calculator handle additional contributions?
A: No, this calculates future value for a single principal amount only.