Annuity Table Overview, Present and Future Values

present value of annuity table

Chief among them is the ability to tailor your financial plan to your current financial status. The present value of your annuity is a component of your net worth, and you need this information to ensure a comprehensive picture of your finances.

What is present value of annuity due table?

The annuity table contains a factor specific to the number of payments over which you expect to receive a series of equal payments and at a certain discount rate. When you multiply this factor by one of the payments, you arrive at the present value of the stream of payments.

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When Is The Present Value Of Annuity Calculator Used?

This problem involves an annuity (the yearly net cash flows of $10,000) and a single amount (the $250,000 to be received once at the end of the twentieth year). To make the analysis easier, let’s assume that the cash flows are generated at the end of each year. These cash flows will continue for 20 years, at which time you estimate that you can sell the apartment building for $250,000. For example, suppose that you are considering purchasing an apartment. After much deliberation, you determine that you will receive net yearly cash flows of $10,000 from rental revenue, less rental expenses from the apartment. The present value of a series of payments or receipts will be less than the total of the same payment or receipts. This is because cash received in the future is not as valuable as cash received today.

It can be used in problems involving annuities in growth, non-growing, and decreasing terms. The formulas allow you to work out the present value of an annuity so that smart investors can see how much their money is worth today because money has the potential for growth over a period of time. Except for minor differences due to rounding, answers to the exercises below will be the same whether they are computed using a financial calculator, computer software, PV tables, or formulas.

What is Present Value of Annuity Formula?

For example, an annuity table could be used to calculate the present value of an annuity that paid $10,000 a year for 15 years if the interest rate is expected to be 3%. To determine an individual cash flow, or annuity factor, by using this table, you would look across the top row for the number of periods and down the left side for the interest rate.

What is the relationship between the present value factor and the annuity factor?

Both the PVIFA and AFA are related since they both calculate the same factor.

The PVIFA is only suitable for annuities that make a single payment, while the AFA can be used for all types of annuities. This means you cannot use it to solve problems where the series of payments increase or decrease over time.

In the financial world, this is explained by the time value of money concept. A common variation of present value problems involves calculating the annuity payment. This table is constructed by summing the individual present values of $1.00 at set interest rates and periods. Suppose you want to determine the value today of receiving $1.00 at the end of each of the next 4 years. To solve this, we can construct a table that determines the present values of each of the receipts. An annuity factor can be used to calculate the total present value of a simple fixed annuity.

Examples: Using Microsoft Office Excel or OpenOffice Calc for Calculating Present Value and Future Value of Investments

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