Present Value Calculator For Growing Annuity

Guidelines to use present value calculator for growing 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 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.

Growth rate per payment:

• Growth rate per payment is the rate at which your annuity grows per period of payments.
• 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 either be '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 growing annuity.

Any predetermined number of cash flows growing at a constant rate is growing annuity. If you have any legal settlement from a lawsuit, then it is imperative to calculate both present and future value, which is often paid in a structured settlement as a graduated annuity, to have an idea of its worth.

Calculate the PV of a growing annuity with this calculator that requires input of very minimal information. The present value of an increasing annuity formula determines the current day value of a series of forthcoming periodic payments that grow at a proportionate rate. Unlike any other finance calculator online, this PV growing annuity financial calculator will give an estimate on average, however, it is imperative to note that the data may differ based on any economic fluctuations. This estimate that this tool generates will help you decide whether to choose structured settlement or a lump sum.

Relying on the theory of time value of money, just like any other financial formula that involve a rate, the PV of a growing annuity formula correlates the rate per period to the number of periods, on the other hand if the payments are monthly, then it should be the monthly rate. As aforesaid, the principle of this theory is time value of money, (a specific quantity of money is worth more today than at a future time).

Ordinary annuities and annuities due are the two basic types of graduated annuities, which is similar to a regular annuity. In graduated annuity due, the cash flow occurs during the beginning of each period, and as with ordinary one cash flow comes at the end of each period. With that said, depending upon the type of contract you have had with the insurance company, sometimes you may have to deal with annuities that pay forever which is called as perpetual or infinite annuity. In this case, a different approach is required.