Calculate the Present Value of Annuity (PV) Online

How to Use the Present Value of Annuity Calculator – Step by Step

Payment Amount (PMT): Interest Rate per Period (%) : Number of Periods (n): Payment Type:

What is Present Value of Annuity Calculator?

A Present Value of Annuity Calculator helps you determine the current value of a series of fixed payments you expect to receive or pay in the future, discounted at a specific interest rate.

This tool saves you time and reduces errors, instantly giving accurate results for both ordinary annuity and annuity due scenarios, which is essential for anyone making financial or investment decisions.

Formula Behind Present Value of Annuity Calculator

The calculator uses the formulas: Ordinary annuity: PV = PMT × [1 – (1 + r)^–n] / r; Annuity due: PV = PMT × [1 – (1 + r)^–n] / r × (1 + r), where PMT = payment amount, r = interest rate per period (decimal), and n = number of periods.

Present Value Annuity Conversion Table

PMT	Rate (%/period)	Periods (n)	Type	Present Value
₹1,000	8	12	Ordinary	₹8,926.52
₹5,000	10	24	Ordinary	₹89,227.37
₹2,500	7.5	36	Annuity Due	₹70,473.49
₹3,000	6	18	Ordinary	₹38,641.94
₹1,200	8	12	Annuity Due	₹9,640.64

Steps to Use Present Value of Annuity Calculator

Enter the payment amount, interest rate per period, and total periods.
Select payment type: ordinary or annuity due.
Click "Calculate" to see instant and detailed step-by-step results.

Why Use Vedantu’s Present Value of Annuity Calculator?

Vedantu’s calculator provides fast, error-free answers for any student or professional who needs to compute the present value of future cash flows, all in a clear and mobile-friendly layout.

Unlike manual calculations, it instantly displays both the numerical answer and a step-by-step breakdown, building your understanding of financial math concepts while handling complex formulas behind the scenes.

Applications of Present Value of Annuity Calculator

This calculator is valuable for analyzing loan EMIs, SIPs, recurring deposits, retirement payouts, and the settlements of investments or scholarships, making it a key resource for real-world personal and business financial planning.

It also helps you compare today's investment needs with future financial goals, supporting studies in topics like compound interest, progression and series, or broad financial mathematics.

For more practice with related concepts, try our Simple vs Compound Interest Formula page, or calculate returns with our Percentage Calculator.

FAQs on Calculate the Present Value of Annuity (PV) Online

1. How do you calculate the present value of an annuity?

The present value (PV) of an annuity is the current worth of a series of future equal payments, discounted at a specific interest rate. To calculate it, you need the payment amount (PMT), the interest rate per period (r), and the number of periods (n). For an ordinary annuity (payments at the end of each period), the formula is PV = PMT × [1 – (1 + r)^–n] / r. For an annuity due (payments at the beginning of each period), the formula is PV = PMT × [1 – (1 + r)^–n] / r × (1 + r). Our Vedantu calculator simplifies this process for you.

2. What is the formula for present value of an ordinary annuity?

The formula for the present value of an ordinary annuity is: PV = PMT × [1 – (1 + r)^–n] / r, where PV is the present value, PMT is the periodic payment, r is the interest rate per period, and n is the number of periods.

3. What is the difference between present value and future value of an annuity?

Present value (PV) is the current worth of a future stream of payments, while future value (FV) is the value of those payments at a specified future date. PV discounts future cash flows to their current value, while FV compounds present values to their future value. Both are crucial concepts in financial mathematics.

4. What is present value annuity due?

A present value annuity due is the current value of a series of equal payments made at the *beginning* of each period. It differs from an ordinary annuity, where payments are made at the *end* of each period. The annuity due formula incorporates an extra (1+r) factor to account for the earlier payments.

5. How to calculate present value of an annuity due?

The present value of an annuity due is calculated using the formula: PV = PMT × [1 – (1 + r)^–n] / r × (1 + r). This formula is similar to the ordinary annuity formula, but it multiplies the result by (1 + r) to reflect the increased value due to earlier payments. Our Vedantu calculator will handle this calculation automatically.

6. What is the present value of a $1000 annuity paid annually for 5 years at 10% interest?

Using the ordinary annuity formula (PV = PMT × [1 – (1 + r)^–n] / r), we get: PV = $1000 × [1 – (1 + 0.1)^–5] / 0.1 ≈ $3790.79. This means that receiving $1000 annually for 5 years has the equivalent present value of approximately $3790.79. Remember this is for an ordinary annuity; an annuity due would yield a higher PV.

7. Where is the present value of an annuity used?

Present value of annuity calculations are vital in various financial contexts. Key applications include: evaluating the present worth of future loan payments (EMIs), analyzing investment opportunities (like SIPs or recurring deposits), determining the current value of pension plans or annuities, and assessing the feasibility of projects with recurring cash flows.

8. What are the steps to use Vedantu's Present Value of Annuity Calculator?

Using Vedantu's calculator is simple: 1. Enter the payment amount (PMT). 2. Input the interest rate per period (r). 3. Specify the number of periods (n). 4. Choose the annuity type (ordinary or due). 5. Click 'Calculate'. The present value will be displayed along with a detailed step-by-step breakdown.

9. How does the interest rate affect the present value of an annuity?

A higher interest rate reduces the present value of an annuity. This is because a higher rate implies that future payments are worth less in today's money. Conversely, a lower interest rate increases the present value, as future payments are discounted less significantly.

10. What is the difference between an ordinary annuity and an annuity due?

The key difference lies in the timing of payments. An ordinary annuity has payments made at the *end* of each period, while an annuity due has payments made at the *beginning* of each period. This timing difference leads to a higher present value for an annuity due because payments are received earlier.

11. How can I learn more about present value calculations?

Vedantu offers comprehensive resources on financial mathematics, including detailed explanations, practice problems, and video tutorials. Explore our website for more in-depth learning on the time value of money and present value calculations. Our expert educators provide clear and concise lessons to enhance your understanding.