Present Value of Annuity

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Present Value of Ordinary Annuity formula (PVOA) is:

 Present Value of Ordinary Annuity formula

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Definitions and terms used in Present Value of Annuity Calculator

Payment Amount
The amount expected to receive or pay each time period.
Interest Rate Per Period
The rate at which the interest for the use of money is charged or paid. Usually, the interest rate is expressed as a percentage and noted on annual basis.
Number of Time Periods
The number of time the interest is compounded (year, month, quarter etc.) and must have the same time frame as ‘Interest Rate Per Period’.
Compound interest
The interest that increases exponentially over time periods. The interest earning interest.
Annuity
Structured schedule of payments of the same amount at regular time intervals.
Ordinary Annuity
The annuity payments are made at the end of each period.
Annuity Due
The annuity payments are made at the beginning of each period.

Present Value of Annuity Examples

Example 1:

You invest 10,000.00 for 25 years at the end of each year. How much the investment is worth today at 5.25% annual interest rate compounded annually?

Payment Amount = 10,000

Interest Rate Per Period = 5.25%

Number of Time Periods = 25

Annuity Type: Ordinary (End)

AnswerPresent Value = 137,474.70

If you were to continually invest 10,000.00 at the end of every year, at a rate of 5.25 % per year, you would receive 494,055.11 after 25 years, which is worth 137,474.70 today.

 

Example 2:

You invest 10,000.00 for 25 years at the beginning of each year. How much the investment is worth today at 5.25% annual interest rate compounded annually?

Payment Amount = 10,000

Interest Rate Per Period = 5.25%

Number of Time Periods = 25

Annuity Type: Due (Beginning)

AnswerPresent Value = 144,692.12

If you were to continually invest 10,000.00 at the beginning of every year, at a rate of 5.25 % per year, you would receive 519,993.00 after 25 years, which is worth 144,692.12 today.

 

Example 3:

You invest 2,500.00 for 25 years at the end of each quarter. How much the investment is worth today at 5.24% annual interest rate compounded quarterly?

Payment Amount = 2,500

Interest Rate Per Period = 5.24% / 4 = 1.31%

Number of Time Periods = 25 * 4 = 100

Annuity Type: Ordinary (End)

AnswerPresent Value = 138,907.44

If you were to continually invest 2,500.00 at the end of every quarter, at a rate of 5.24 % per year compounded quarterly, you would receive 510,454.51 after 25 years, which is worth 138,907.44 today.