Formula For Growing Annuity

To calculate any of the various features of a growing annuity plug the numbers into the following formula.

Formula for growing annuity. The timeline appears below. There are monthly payments with a quarterly compound interest rate. I Discount rate.

R interest rate. C Initial cash flow. A growing annuity is an annuity where the payments grow at a particular rate.

At a growth rate of 2 g the initial payment at the end of period one of 51056 would have grown into a payment 59820 by the end of period nine. The future value of a growing annuity formula can be found by first looking at the following present value of a growing annuity formula Present Value can be converted into future value by multiplying the present value times 1rn. By multiplying the 2nd portion of the PV of growing annuity formula above by 1rn the formula would show as.

For example assume that the initial payment is 100 and the payments are expected to grow each period at 10. G Growth rate. The future value of our graduated annuity due is 6 697 17 at the end of period 5.

The formula could easily obtain the future value of a growing annuity. FV P 1rn 1gn r-g FV is the future value of the growing annuity P is the first payment to the annuity the rate per period is r g is the growth rate and the total number of periods is denoted by n. PVGOA PA r gr 1 1 gr 1.

B finding future value of each cash flow at the interest rate r and c then summing up all the component future values. Formula for the present value of an increasing annuity as well as the special case formulas required when the growth rate in the annuity equals the nominal interest rate per period. N Number of periods.