Deferred Annuity

Annuity at the end of the period

Future Value of the Annuity at End of the Period (FVAEP) is product of Principal amount (A) and Future Value Interest factor Annuity (FVIFA).

In view of formula

FVAEP = A*FVIFA

Where

A = Principal Amount
FVIFA = [(1+k)^n]-1] / k, where k = rate of Interest and n = No. of years

For example

Assuming that Mr. X deposits Rs.1,000 annually in a bank for 5 years at the rate of 10%.

Then the value of the deposits after 5 years based on deferred annuity is

FVAEP = Rs.1,000(FVIFA) for 10% and 5 year = 1,000*(((1 .10)^5 -1)/0.10) = 1,000 × 6.105 = Rs.6,105