Annuities and loans
Annuities and perpetuities
Value level payment streams with formulas and with PV() and FV().
17 minintermediateMembers
Learning objectives
- Value an ordinary annuity and an annuity due
- Use PV() and FV() and their sign convention
- Value a perpetuity
- Value an annuity that starts in a later year
An annuity is a series of equal payments at regular intervals: lease payments, loan installments, pension income. Payments at the end of each period form an ordinary annuity; payments at the start form an annuity due.
PV = PMT × [1 − (1 + r)⁻ⁿ] ÷ r
- PMT
- payment per period
- r
- rate per period
- n
- number of payments
Included with a Formula Quest membership
The rest of this lesson is for members. Members get the full lesson, including its 4 graded exercises, and every other Finance Quest lesson.