Home
Back
Annuity Present Value Formula:
| From: | To: |
Annuity present value calculates the current worth of a series of equal payments made at regular intervals over a specified period, discounted at a given interest rate. It helps determine how much a future stream of payments is worth today.
The calculator uses the annuity present value formula:
Where:
Explanation: This formula discounts each future payment back to its present value and sums them to determine the total current worth of the annuity.
Details: Present value calculations are essential for investment analysis, retirement planning, loan amortization, and comparing different financial options. They account for the time value of money, recognizing that money available today is worth more than the same amount in the future.
Tips: Enter the periodic payment amount in dollars, interest rate as a percentage, and number of periods. All values must be positive numbers. The calculator assumes ordinary annuity (payments at end of period).
Q1: What's the difference between ordinary annuity and annuity due?
A: Ordinary annuity has payments at the end of each period, while annuity due has payments at the beginning. This calculator assumes ordinary annuity.
Q2: Can this calculator handle different compounding periods?
A: The calculator uses the rate and periods as entered. Ensure the interest rate matches the payment period (annual rate for annual payments, monthly rate for monthly payments).
Q3: What if the interest rate is zero?
A: When interest rate is zero, the present value simply equals the total of all payments (PMT × n).
Q4: How is this used in real-world applications?
A: Common applications include valuing pension payments, structured settlements, mortgage calculations, and investment analysis.
Q5: What are the limitations of this calculation?
A: This assumes constant payments and interest rates. It doesn't account for taxes, inflation, or changing rates over time.