A lump-sum payment may be combined with a structured settlement in order to meet immediate expenses, such as medical bills, repayment of debts, rehabilitation costs, and the like.
Guidelines to use present value calculator for annuity
Number of Periods:
- No of periods are generally no of years in future that you expect your investment to be matured.
- It can be either a whole number or a decimal number in the case of partial period such as months
Example: 2 years and 6 months can be entered as 2.5 years
Interest rate per period:
- Annual nominal interest rate at which the future value of annuity is discounted.
- Enter rate in terms of percentage. It should be greater than zero.
Compounding per period:
- The frequency of compounding that occurs in a period.
- It can be annually, half-yearly, monthly, quarterly or daily.
Payment amount:
- Payment amount is the amount of money you receive per period.
- It should be greater than zero
Payment frequency:
- Payment frequency is the frequency at which you get paid per period.
- It can be annually, half-yearly, monthly, quarterly or daily.
Payment at period:
- Payment at period is when the payment is made in a period.
- It can be either 'end of period' if the payment is made at the end of the period(Ordinary annuity, in arrears) or 'beginning of period' if the payment is made at the beginning of the period(Annuity due, in advance)
Result:
- The calculated present value of annuity.
Given the interest rate per period, number of periods, compounding per period, payment frequency, payment period and payment amount of an annuity, this present value calculator for an annuity determines the present value of a number of equal cash flows to be received in the future. This online calculator helps you to know what a future income stream is worth in today's dollars. The PV of annuity formula depends on the theory of time value of money, in that one dollar present day is worth more than that same dollar at a future date.
Whether you are placing an annuity within a structured settlement or lump sum or planning to have it as other investment option, it is vital to do proper calculations. When calculating the present value, it entails the compounding of interest signifying that any interest received is invested again, it is said to earn interest at the same rate as the principal. Simply said, the compounding of interest can be very considerable when there is substantial interest rate number of years.