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Annuity Payout Formula:
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The annuity payout formula calculates the fixed periodic payment amount for an ordinary annuity based on present value, interest rate, and number of periods. It's commonly used for retirement planning, loan amortization, and investment analysis.
The calculator uses the annuity payout formula:
Where:
Explanation: The formula calculates the fixed payment needed to fully amortize a loan or annuity over a specified term at a given interest rate.
Details: Accurate annuity calculations are crucial for financial planning, retirement income strategies, loan structuring, and investment analysis. They help determine sustainable withdrawal rates and payment schedules.
Tips: Enter present value in USD, rate per period as a decimal (e.g., 0.05 for 5%), and 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 calculation?
A: The rate (r) should match the payment frequency. For monthly payments with annual rate, divide rate by 12 and multiply years by 12.
Q3: Can this be used for mortgage calculations?
A: Yes, this is the standard formula for fixed-rate mortgage payments where PV is loan amount, r is monthly interest rate, and n is total months.
Q4: What if my payments are annual but rate is monthly?
A: You must convert to consistent time periods. Either convert monthly rate to annual equivalent or adjust periods to months.
Q5: How does inflation affect these calculations?
A: This calculates nominal payments. For real (inflation-adjusted) payments, use a real interest rate (nominal rate minus inflation rate).