Annuity Factor

An annuity factor is a financial value that when multiplied by a periodic amount shows the present or future value of that amount.

Annuity factor. It is a factor that is used to calculate the present value of one dollar cash flows. Annuity Factor means the cost per dollar per month of pension using interest rates and mortality tables considered appropriate by the Actuary and the age of the Member as subject to the Pension Benefits Act. This formula relies on the concept of time value of money.

PV Pmt x 1 - 1 1 in i Present value annuity tables are used to provide a solution for the part of the present value of an annuity formula shown in red this is sometimes referred to as the present value annuity factor. The present value annuity factor formula is a simplified version of the present value of an annuity formula. Table A-1 Future Value Interest Factors for One Dollar Compounded at k Percent for n Periods.

FVIFA kn 1 k n - 1 k. Table A-2 Future Value Interest Factors for a One-Dollar Annuity Compouned at k Percent for n Periods. The annuity factor can therefore be multiplied by the periodic annuity payment to determine the present value of the remaining annuity payments.

PV C X 1- 1r -n r Where PV Present value of an annuity. The annuity factor used is the discounted present value of payments and does not include the risk premium for the life annuity. It is based on the time value of money which states that the value of a.

Since present value interest factor of annuity is a bit of a mouthful it is often referred to as present value annuity factor or PVIFA for short. Most often the annuity factor is applied to an investment where there is an annual payment or return. Example 1 Example 2.

The present value interest factor of an annuity is used to calculate the present value of a series of future annuities. C cash flow per period or payment amount. The initial payment earns interest at the periodic rate r over a number of payment periods n.