Component |
Description |
Payment Amount |
The amount of each annuity payment. |
Number of Payments |
The total number of annuity payments. |
Interest Rate |
The interest rate per period. |
Present Value of Annuity |
The current value of a series of future annuity payments, discounted at a given interest rate. |
Formula |
Present Value of Annuity = Payment Amount × (1 – (1 + Interest Rate)^-Number of Payments) / Interest Rate |
Purpose |
Used to calculate the present value of an ordinary annuity for financial planning and decision-making. |