1.Example of Future Value of Annuity Due Formula
To elaborate on the prior example of the future value of an annuity due, suppose that an individual would like to calculate their future balance after 5 years with today being the first deposit. The amount deposited per year is $1,000 and the account has an effective rate of 3% per year. It is important to note that the last cash flow is received one year prior to the end of the 5th year.
For this example, we would use the future value of annuity due formula to come to the following equation: