Present Value-Annuity Due

Last modified by

on

Jul 24, 2020, 6:28:07 PM

Created by

on

Jul 9, 2014, 10:04:39 AM

P V_{AD} = P \cdot (\frac{1 - {(1 + r)}^{- n}}{r}) \cdot (1 + r)

$PV_"AD" = P *((1- (1+ r )^- n )/ r )*(1+ r )$

Periodic Payment (P)

$"Periodic Payment" (P)$

Rate per period (r)

$"Rate per period" (r)$

Number of Periods (n)

$"Number of Periods" (n)$

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70b7ed22-0750-11e4-b7aa-bc764e2038f2

Present Value of an annuity due is used to calculate the present value of a series of equal payments where the payment occurs at the beginning of each period.

EXAMPLE

Ms. Abrianna just won a million-dollar lottery of which $50,000 will be given to her at the beginning of each year for the next 20 years. What is the present value of this equal stream of payments if money can earn 7% annual interest?

Using the calculator above:

PVAD=$50,000 [(1 - (1 / (1 + .07)²⁰)) / .07]) x (1+.07)

PVAD=$ 566779.76

REFERENCE

Financeformulas.net .Present Value of Annuity Due http://www.financeformulas.net/Present_Value_of_Annuity_Due.html (Retrieved 2/12/2015)

This equation, Present Value-Annuity Due, is used in 2 pages

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• Present Value (PV) Calculator by EdwardOmbui

• Present Value Calculator by 18m01abt049

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