Ordinary Annuity Formula
The interest rate for the ordinary annuity described above can be computed with the following equation.
Ordinary annuity formula. Present Value of Ordinary Annuity PMT 1 1 rm nm. The formula for annuity is PV Annuity x 1 1 i-n i. Annuity r PVA Ordinary 1 1 r-n.
The present value payment amount and the number of periods. In line four we calculate our factor to be 3605. In general ordinary annuity payment is made on a monthly quarterly semi-annual or annual basis.
Here A annuity cash flow i interest rate n number of payments. You need to know the amount of money being de. Accordingly use the annuity formula in an electronic spreadsheet to more precisely calculate the correct amount.
Return To Home Page. P PMT 1 - 1 1 rn r. The formula for calculating the present value of an ordinary annuity is.
The present value calculation for an ordinary annuity is used to determine the total cost of an annuity if it were to be paid right now. PMT 1 1 r -n r. The PV of the loan is 3500.
First click MONTHLY then click PRESENT VALUE then enter a monthly amount of 100 for 5 years at 12 interest. We click CALCULATE and our answer is 449550. Taking an example from Wikipedia what is the present value of a 5 year ordinary annuity with an annual interest rate of 12 with monthly payments of 10000.