Compute Future Value of an Annuity in C

Introduction

In this lab, you will learn how to compute the future value of an annuity using C programming. The lab covers the step-by-step process of reading the necessary financial parameters, such as periodic payment, interest rate, and number of periods, and then applying the standard annuity future value formula to calculate the final future value. By the end of the lab, you will have a working C program that can perform this financial calculation.

The lab starts by guiding you through the process of reading the input parameters from the user. Then, it introduces the annuity future value formula and shows you how to implement it in C. Finally, the lab demonstrates how to print the calculated future value to the console.

Skills Graph

Read Payment, Rate, Number of Periods

In this step, you will learn how to read the key financial parameters needed to calculate the future value of an annuity in C. We'll create a program that prompts the user to input the periodic payment amount, interest rate, and number of periods.

First, let's create a new C file for our financial calculation:

cd ~/project
nano annuity_future_value.c

Now, enter the following code to read the financial parameters:

#include <stdio.h>

int main() {
    double payment, rate;
    int periods;

    // Prompt user for input
    printf("Enter periodic payment amount: ");
    scanf("%lf", &payment);

    printf("Enter annual interest rate (as a decimal): ");
    scanf("%lf", &rate);

    printf("Enter number of periods: ");
    scanf("%d", &periods);

    // Display the input values
    printf("\nInput Parameters:\n");
    printf("Periodic Payment: $%.2f\n", payment);
    printf("Annual Interest Rate: %.2f%%\n", rate * 100);
    printf("Number of Periods: %d\n", periods);

    return 0;
}

Compile and run the program:

gcc annuity_future_value.c -o annuity_future_value
./annuity_future_value

Example output:

Enter periodic payment amount: 1000
Enter annual interest rate (as a decimal): 0.05
Enter number of periods: 10

Input Parameters:
Periodic Payment: $1000.00
Annual Interest Rate: 5.00%
Number of Periods: 10

Let's break down the code:

• We use double for payment and rate to handle decimal values
• scanf() is used to read user inputs for payment, rate, and periods
• %lf format specifier is used for reading double-precision floating-point numbers
• %d is used for reading integer values
• We print the input values to confirm the user's entries

FV = Payment*((1+R)^N -1)/R

In this step, you will implement the future value calculation for an annuity using the standard financial formula. We'll modify the previous C program to compute and display the future value.

Open the existing source file:

cd ~/project
nano annuity_future_value.c

Update the code to include the future value calculation:

#include <stdio.h>
#include <math.h>

int main() {
    double payment, rate, future_value;
    int periods;

    // Prompt user for input
    printf("Enter periodic payment amount: ");
    scanf("%lf", &payment);

    printf("Enter annual interest rate (as a decimal): ");
    scanf("%lf", &rate);

    printf("Enter number of periods: ");
    scanf("%d", &periods);

    // Calculate Future Value
    future_value = payment * ((pow(1 + rate, periods) - 1) / rate);

    // Display input parameters and future value
    printf("\nInput Parameters:\n");
    printf("Periodic Payment: $%.2f\n", payment);
    printf("Annual Interest Rate: %.2f%%\n", rate * 100);
    printf("Number of Periods: %d\n", periods);
    printf("\nFuture Value: $%.2f\n", future_value);

    return 0;
}

Compile the program with math library:

gcc annuity_future_value.c -o annuity_future_value -lm

Run the program:

./annuity_future_value

Example output:

Enter periodic payment amount: 1000
Enter annual interest rate (as a decimal): 0.05
Enter number of periods: 10

Input Parameters:
Periodic Payment: $1000.00
Annual Interest Rate: 5.00%
Number of Periods: 10

Future Value: $12578.95

Key points about the calculation:

• pow(1 + rate, periods) calculates the compound interest factor
• The formula Payment * ((1+R)^N - 1) / R computes the future value
• -lm flag is used to link the math library for pow() function

Print Future Value

In this final step, you will enhance the annuity future value program by adding formatted output and additional financial insights to make the results more informative and readable.

Open the existing source file:

cd ~/project
nano annuity_future_value.c

Update the code to improve output formatting and add financial insights:

#include <stdio.h>
#include <math.h>

int main() {
    double payment, rate, future_value, total_contribution;
    int periods;

    // Prompt user for input
    printf("Financial Annuity Future Value Calculator\n");
    printf("----------------------------------------\n");
    printf("Enter periodic payment amount: ");
    scanf("%lf", &payment);

    printf("Enter annual interest rate (as a decimal): ");
    scanf("%lf", &rate);

    printf("Enter number of periods: ");
    scanf("%d", &periods);

    // Calculate Future Value
    future_value = payment * ((pow(1 + rate, periods) - 1) / rate);
    total_contribution = payment * periods;

    // Display detailed financial summary
    printf("\n--- Financial Summary ---\n");
    printf("Periodic Payment:      $%.2f\n", payment);
    printf("Annual Interest Rate:  %.2f%%\n", rate * 100);
    printf("Number of Periods:     %d\n", periods);
    printf("Total Contribution:    $%.2f\n", total_contribution);
    printf("Future Value:          $%.2f\n", future_value);
    printf("Total Interest Earned: $%.2f\n", future_value - total_contribution);

    return 0;
}

Compile the program:

gcc annuity_future_value.c -o annuity_future_value -lm

Run the program:

./annuity_future_value

Example output:

Financial Annuity Future Value Calculator
----------------------------------------
Enter periodic payment amount: 1000
Enter annual interest rate (as a decimal): 0.05
Enter number of periods: 10

--- Financial Summary ---
Periodic Payment:      $1000.00
Annual Interest Rate:  5.00%
Number of Periods:     10
Total Contribution:    $10000.00
Future Value:          $12578.95
Total Interest Earned: $2578.95

Key improvements in this version:

• Added a title and separator for better user experience
• Calculated total contribution
• Displayed total interest earned
• Used consistent formatting for financial values

Summary

In this lab, you will learn how to read the key financial parameters needed to calculate the future value of an annuity in C, including the periodic payment amount, interest rate, and number of periods. You will then implement the future value calculation using the standard financial formula and display the result. The lab covers the essential steps to build a program that can compute the future value of an annuity given the necessary inputs.