How to use it
- Use the formula below with your own figures.
The formula
PV of annuity = PMT·[1−(1+r)⁻ⁿ]/r.
Worked example
$500/month for 20 years at 5% has a large present value.
Frequently asked questions
Ordinary vs due?
Payments at period end vs start.
Where is this used?
Pensions, loans and structured settlements.
Tips
- Time in the market beats timing the market.
- Reinvest returns to let compounding work.
- Keep fees low — they compound against you.
Key terms
- Compounding
- Earning returns on past returns.
- CAGR
- The smoothed annual growth rate.
- Yield
- Income as a percent of price.