If we were to value this bond at a 4% discount rate, the present value would jump to $12,500 (PV = $500 0.04). If we valued it with a 10% discount rate, the present value would fall to $5,000 (PV ...

While not the most complex formula, it can still be tricky to calculate the present value of an annuity. You can thank the number of variables features in the formula for that.

PV, or present value, is the value of future annuity payments you’ll receive, in today’s dollars. FV, or future value, is what your annuity will be worth after you’ve made your payments.

The formula for perpetual annuities takes a simpler form: Present Value = Payments / Interest Rate In the previous example, an infinite number of payments with a 2.4 percent inflation rate produce ...

With an annuity, you might be comparing the value of taking a lump sum versus the annuity payments. Calculating the present value of annuity lets you determine which is more valuable to you.

It’s possible to calculate the present value of an annuity using Excel, but you’ll need some information at your fingertips: the annuitization period, the payment amount, and the interest rate.

F is the future value of the annuity. For example, if the annuity pays $500 annually for 10 years and the discount rate is 6 percent, you have $500 * ( [1 + 0.06]^10 - 1 )/0.06.

In the case of a T-bill, we know our purchase price, or present value, its face value or future value, and how long until it matures. For short-term Treasuries, this duration could be 30 to 182 ...

There’s even a helpful annuity calculator to do the math for you. So, if you were 35 and contributed $500 a month, your payments would be $4,457.44 per month when you retire at 65.