Annuity factor: Difference between revisions
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The present value of the annuity is then: | The present value of the annuity is then: | ||
= AF x Time 1 cash flow. | |||
The annuity factor for 'n' periods at a periodic yield of 'r' is calculated as: | The annuity factor for 'n' periods at a periodic yield of 'r' is calculated as: | ||
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* [[Discount factor]] | * [[Discount factor]] | ||
* [[Perpetuity factor]] | * [[Perpetuity factor]] | ||
Revision as of 08:31, 14 May 2013
Financial maths. (AF). A method for calculating the total present value of a simple fixed annuity. Mathematically it is the cumulative discount factor for maturities 1 to n inclusive, when the periodic cost of capital is the same for all relevant maturities.
The present value of the annuity is then: = AF x Time 1 cash flow.
The annuity factor for 'n' periods at a periodic yield of 'r' is calculated as: AF(n,r) = 1/r x [1-(1+r)-n]
Also known as the Annuity formula.
