Finance & Interest
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Present Value of Annuity

Present value of a series of equal payments.

Formula

PV=P1−(1+r)−nrPV = P\frac{1 - (1+r)^{-n}}{r}

Variables

PPayment
rRate/period
nPeriods

Example

A $1000/year pension for 10 years at 5% is worth about $7722 today.

Did You Know?

Lottery winners face this math when choosing a lump sum over annual payments — the lump is worth less than the total.

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