Annuity Present Value Calculator
The Annuity Present Value Calculator finds how much a series of equal future monthly payments is worth in today's money. Enter the monthly payment, annual interest rate, and number of years. The formula used is: PV = PMT × [(1 − (1 + r)⁻ⁿ) ÷ r], where r is the monthly rate and n is the number of months.
Formula
PV = PMT × [(1 − (1 + r)⁻ⁿ) ÷ r]
- The Annuity Present Value Calculator updates instantly when you change any value.
- Formula: PV = PMT × [(1 − (1 + r)⁻ⁿ) ÷ r]
- Input definitions: • Monthly Payment: the equal amount received each month • Annual Rate %: the yearly discount rate (÷ 12 for the monthly rate r) • Years: the length of the payment stream (× 12 for the number of months n)
- Present value tells you the single amount today that is equivalent to the whole stream of future payments.
- A higher discount rate lowers the present value, because future money is worth less today.
Example Calculation
Inputs
- Monthly Payment (PKR): 1000
- Annual Rate %: 5
- Years: 10
Receiving PKR 1,000 a month for 10 years, discounted at 5% annually, has a present value of about PKR 94,281 — less than the PKR 120,000 of nominal payments because of the time value of money.
Frequently asked questions
What is present value?
It is the worth today of money you will receive in the future, found by discounting each future payment at a chosen interest rate.
Why is it lower than the sum of payments?
Because future money is worth less than money now, discounting reduces the combined value of the payments.
What rate should I enter?
Enter the annual discount rate as a plain number (for example 5 for 5%). It is converted to a monthly rate internally.
Is this an ordinary annuity?
Yes. Each payment is assumed to occur at the end of the month.
When is this useful?
Use it to value pensions, settlements, leases, or any stream of equal future payments in today's terms.