Present Value of Annuity Calculators – Ordinary Annuity and Annuity Due
The present value of an annuity represents the current value of a future, level series of payments for a specified time. It is based on the ‘time value of money’ concept, which breaks down to the idea that a dollar today is worth more than a dollar tomorrow (as a dollar today can be invested to earn interest until tomorrow). The most common example of an annuity is perhaps the fixed residential mortgage, whereby a certain sum of money is borrowed (today) to finance the purchase of a home, to be repaid over time in a series of level payments, at a specified interest rate. In an ordinary annuity, payments are made at the end of each period.
In certain other transactions (i.e. rent), payments are made at the start of each period. Where that is the case, use of the annuity due formula is appropriate (which differs from the ordinary annuity formula by a factor of 1 + interest rate).
Using the calculators below, you can solve for any of the variables in either formula, and see how your balance declines each period, in the table and chart at the bottom of the page.