×

# Time Value of Annuity

Can someone please explain to me this formula in detail. I just can't figure how dividing by $$r$$ leads to converting the numerator to Future value of an annuity?

What I understand from the numerator is it basically removes the principal amount and keeps the interest from compounding a single cash flow after subtracting 1. Below is the formula:

FVAn = A $$\frac {[(1+r)^n-1]}{r}$$

Where, FVAn = Future Value of an Annuity A = Annuity
r = Rate of Interest
n = number of years

Note by Namit Jain
1 year, 2 months ago

MarkdownAppears as
*italics* or _italics_ italics
**bold** or __bold__ bold
- bulleted- list
• bulleted
• list
1. numbered2. list
1. numbered
2. list
Note: you must add a full line of space before and after lists for them to show up correctly
paragraph 1paragraph 2

paragraph 1

paragraph 2

[example link](https://brilliant.org)example link
> This is a quote
This is a quote
    # I indented these lines
# 4 spaces, and now they show
# up as a code block.

print "hello world"
# I indented these lines
# 4 spaces, and now they show
# up as a code block.

print "hello world"
MathAppears as
Remember to wrap math in $$...$$ or $...$ to ensure proper formatting.
2 \times 3 $$2 \times 3$$
2^{34} $$2^{34}$$
a_{i-1} $$a_{i-1}$$
\frac{2}{3} $$\frac{2}{3}$$
\sqrt{2} $$\sqrt{2}$$
\sum_{i=1}^3 $$\sum_{i=1}^3$$
\sin \theta $$\sin \theta$$
\boxed{123} $$\boxed{123}$$

Sort by:

Did you look at the time value of money? It lists out the present value of an annuity.

Staff - 1 year, 2 months ago