credits

formulas of annuity

Regular Annuity Formulas

Are you a student? Did you know that Amazon is offering 6 months of Amazon Prime - free two-day shipping, free movies, and other benefits - to students?
Click here to learn more

These are the main formulas that are needed to work with regular annuity cash flows (Definition/Tutorial). Please note that these formulas work only on a payment date, not between payment dates. This is the same restriction used (but not stated) in financial calculators and spreadsheet functions.

I use MathJax to display these formulas. You can click on the formulas to see a zoomed version of it that is easier to read.

height="90" width="80%">\[Pmt = \frac{{P{V_A}}}{{\left[ {\frac{{1 - \frac{1}{{{{\left( {1 + i} \right)}^N}}}}}{i}} \right]}}\]

Regular Annuity Formulas
To solve for Formula
Future Value \[F{V_A} = Pmt\left[ {\frac{{{{\left( {1 + i} \right)}^N} - 1}}{i}} \right]\]
Present Value \[P{V_A} = Pmt\left[ {\frac{{1 - \frac{1}{{{{\left( {1 + i} \right)}^N}}}}}{i}} \right]\]
Periodic Payment
when PV is known
Periodic Payment
when FV is known
\[Pmt = \frac{{F{V_A}}}{{\left[ {\frac{{{{\left( {1 + i} \right)}^N} - 1}}{i}} \right]}}\]
Number of Periods
when PV is known
\[N = \frac{{ - \ln \left( {1 - \frac{{P{V_A}}}{{Pmt}}i} \right)}}{{\ln \left( {1 + i} \right)}}\]
Number of Periods
when FV is known
\[N = \frac{{\ln \left( {1 + \frac{{F{V_A}}}{{Pmt}}i} \right)}}{{\ln \left( {1 + i} \right)}}\]
Discount Rate Can only be calculated through a trial and error process
Variable Definitions
Variable Definition
$$FV$$ Future Value
$$PV$$ Present Value
$$i$$ Discount Rate
$$N$$ Number of Periods
$$Pmt$$ Payment (per period)
$$ln$$ Natural logarithm function (log base e)
Previous: Lump Sum Formulas Next: Annuity Due Formulas


Category: Annuity

Similar articles: