Calculate Annuity Present Value |
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Annuity calculations can be difficult for beginners. If you invest a little time with it, it can turn real simple. As a matter of fact, all investors sooner or later have to comprehend the calculations associated with their annuity formats, to be able to reap the maximum benefits from a wise decision. |
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An annuity is a series of equal payments or receipts between an individual and an insurance company. The payments are initially made by the individual and are evenly spaced out. After a period of time, the investment stops and the company pays back the money. Calculations explain how such payments and receipts are to be done over time. |
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The Present Value of an Ordinary Annuity (PVOA) is the value of the entire cumulated series of promised future payments that are discounted to a single equivalent value today. In other words, you get to know the exact amount of money that you shall get back as valued today, or the time when you invest. This quickly helps to understand the net worth of the growth of the money. |
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| PVOA can also be thought of as the amount you must invest today at a specific interest rate so that when you withdraw an equal amount each period, the original principal and all accumulated interest will be completely exhausted at the end of the annuity. |
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| The present value of an annuity can be calculated by arriving at the present value of each payment in the series of payments to be received, using a present value formula. Each value is then summed up for the final results. The formula is: |
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PVOA = PMT [(1 - (1 / (1 + i) n )) / i]
Where:
PVOA = Present Value of an Ordinary Annuity
PMT = Amount of each payment
i = Discount Rate per Period
n = Number of Period s |
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To make the process of calculating easy, one often finds ‘annuity tables’ or ‘calculators’ offered on brochures and web sites respectively. It is constructive to refer to the annuity tables initially and attempt to decipher them while deciding the worth of your plan several years from now. It is advisable that you take help of a friend or an expert. Calculators are pre-programmed tools where the software calculates for you and you simply need to type in your investment conditions. Such calculators are also very popular. |
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Annuity present value calculations are an important step before you choose the right plan. You may find a deal to be good outwardly, but knowing the annuity calculations show the exact picture. The process is also beneficial for your money in the longer term. For help and advice to calculate annuity present value, Click here or call at the toll-free 1-800-998-4056. We at AnnuityLibrary.com provide detailed analysis simplified to the extent you want. |
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