A sequence of equal payments made at equal periods of time is called an annuity. For example, if £1,500 is deposited at the end of each year, in an account paying 8% per year, compounded annually, how much would be in the account after five years?
If the payments are made at the end of the first time period, and the frequency of payments is the same as the frequency of compounding, the annuity is called an ordinary annuity. The time between payments is known as the payment period, with the time from the beginning of the first payment period to the end of the last called the term of the annuity. The future value of the annuity is defined as the sum of compound amounts of all the payments, compounded to the end of term.
Experiment with the example below to find out how much you would have to save each year to reach your desired amount...