If you want to determine an annuity's present value interest factor, you can use this PVIFA calculator.
PVIFA is also known as the present value interest factor of an annuity. It's a factor used to estimate the current value of the annuity payment series. In other words, PVIFA is used to calculate the current value of money in the future: It estimates the worth of the equivalent amount of money you have at present with the amount of money you will have in the future. Typically, it is used while making decisions on investments. For instance, if you're confused between choosing an extensive amount of money or an annuity, you can use PVIFA. If you have a choice between a massive sum of money or an annuity, and you're not sure which one to pick
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Formula of PVIFA Calculator
To determine the present value interest factor of an annuity, you can use our PVIFA calculator or a formula listed below:
PVIFA = (1 - (1 + r)-n) / r
r = per period interest rate
n = the number of periods
To calculate the GDP growth rate, you can use our GDP Growth Rate Calculator.
For a more precise understanding of concepts, let us have an example below:
Suppose an entrepreneur has invested a considerable amount of money in a business of 3d printers. In a year, he gets each $3000 payment from the cash he invested. The total number of payments he received in a year is eight. Whereas the interest rate is 4%, now find out the present value of this annuity.
n = 8
r = 4% = 0.04
The present value of this annuity = ?
From the values of the above-given data, let us find the PVIFA using the formula listed below:
PVIFA = (1 - (1 + r)-n) / r
Putting values in the formula:
PVIFA = (1 − (1 + 0.04)-8) / 0.04 = 6.73
In present value, every single dollar ($1) you earn, is worth 6.73 times more which means:
$1 * 6.73 = $6.73
Now, how much is the total value of eight payments worth? As we have the value of each dollar, simply multiply it by the total amount of value:
6.73 * $3,000 = $20,198
$20,198 is the present value of this annuity.
For most general interest rates and amount of periods, you can use the present value table listed below:
|Interest rate → / Periods ↓||1%||2%||3%||4%||5%|
For the values having the above interest rate and time periods, you can use our PVIFA calculator.
How to use the PVIFA Calculator?
The steps to use the PVIFA calculator are as follows:
Step 1: Enter the value of the interest rate per period in the first required input.
Step 2: Enter the value of the number of periods in the second required input.
Step 3: The calculator will automatically display an answer on the screen.
To calculate an annuity's present value interest factor, enter the required values in our PVIFA calculator, and it will display the answer on the screen.