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(2) Present value
(3) 1 $700 0.926 $ 648.20 2 700 0.857 599.90 3 700 0.794 555.80 4 700 0.735 514.50 5 700 0.681 476.70 Present value of annuity
aPresent $2,795.10 value interest factors at 8% are from Table A–2. Using Computational Tools to Find
the Present Value of an Ordinary Annuity present value interest factor
for an ordinary annuity
The multiplier used to calculate
the present value of an ordinary
annuity at a specified discount
rate over a given period of time. Annuity calculations can be simplified by using an interest table for the present
value of an annuity, a financial calculator, or a computer and spreadsheet.
The values for the present value of a $1 ordinary annuity are given in Appendix
Table A–4. The factors in the table are derived by summing the present value
interest factors (in Table A–2) for the appropriate number of years at the
given discount rate. The formula for the present value interest factor for an ordinary annuity with cash flows that are discounted at i percent for n periods,
n PVIFAi,n 1 t1 i)t...
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