Present Value of Annuity

This final part deals with the present value of an annuity.  As previously discussed, an annuity is an equal periodic amount.  That is, to qualify as an annuity, the amount of each payment or deposit must be the came (equal), and the time period between each payment or deposit must be the same (equal).  As in the other parts, this will focus on solutions utilizing Time Value of Money Tables, specifically the Present Value of an Annuity table.  It will distinguish between ordinary annuity (payments or deposits occur at the end of the period) and annuity due (payments or deposits occur at the beginning of the period).  Another way of looking at present value of an ordinary annuity is to realize that the present value amount is determined one period before the first payment.  In an annuity due, the present value is determined at the time of the first payment.  Examples are offered to illustrate the concepts related to Present Value of an Annuity.

For a PDF handout of the presentation, click here.

Leave a Reply