Home
Back
Annuity Payment Formula:
| From: | To: |
An annuity payment is a fixed sum of money paid to someone each period, typically for the rest of their life or for a specified number of periods. It's commonly used in retirement planning and loan amortization.
The calculator uses the annuity payment formula:
Where:
Explanation: The formula calculates the fixed payment needed to pay off a loan (principal + interest) in equal installments over a specified number of periods.
Details: Understanding annuity payments is crucial for financial planning, loan amortization, retirement planning, and investment decisions. It helps determine how much you'll pay or receive periodically for a given principal amount.
Tips: Enter the principal amount in dollars, interest rate per period as a decimal (e.g., 0.05 for 5%), and the number of periods. All values must be positive numbers.
Q1: What's the difference between ordinary annuity and annuity due?
A: Ordinary annuity payments are made at the end of each period, while annuity due payments are made at the beginning. This calculator assumes ordinary annuity.
Q2: How does compounding frequency affect the payment?
A: The rate (r) should match the payment frequency. For monthly payments with annual rate, divide the annual rate by 12.
Q3: Can this be used for mortgage calculations?
A: Yes, mortgages typically use this formula where principal is loan amount, rate is monthly interest, and periods is number of months.
Q4: What if my payments change over time?
A: This calculator assumes fixed payments. For variable payments, more complex calculations are needed.
Q5: How accurate is this calculator?
A: It provides mathematically exact results for the given inputs, assuming fixed rate and payment amounts.