Annuity Factor Formula
1-(1+i)-n
I
I= Interest Rate
N= number of year of annuity
Annuity Factor Formula Example
Interest Rate 9% and
annuity is period is 5 years. Calculate annuity factor?
= 1-(1.09)-5
.09
=.35/.09
=3.889
Annuity factor may directly
be seen in annuity table in year five row under the interest rate of 9%.
Annuity Factor use
Annuity factor is used to
calculate the present value of annuity (equal cash flows). For example if the
annuity is $ 10,000 (p.a) , then we can find present value of annuity .
= $ 10,000 x 3.889
=38,890
