Present Value of an Annuity:

"An annuity is an account earning compound interest from which periodic withdrawals are made. Suppose that the account has an annual rate of r compounded m times per
year, so that i=r/m is the interest rate per compounding period. Suppose also that the account starts with a balance of PV. If you receive a payment of PMT at the end of each
compounding period, and the account is down to $0 after t years, or n=m*t periods."
Example Input Data:
Variables:
Present Value(PV)
Payment(PMT)
Interest Rate(r)
Times Compounded Per Year(m)
Time(t)
(i)=r/m
(n)=m*t

Payment
(t)
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Payment Amount
(PMT)

Amount
$

50,000.00
$4,012.13
5.00%
1
20
0.05
20

Formula:
PV=PMT{(1-(1+i)^-n)/(i)}
50000=PMT{(1-(1+0.05)^-20)/(0.05)}
PMT=$4,012.13

Amortization Table of a Present Value Annuity (Example Data)

Interest Due
Loan Reduction
(PV)*{(r)/(m)}
(PMT-Interest Due)

$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13
$4,012.13

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

2,500.00
2,424.39
2,345.01
2,261.65
2,174.13
2,082.23
1,985.73
1,884.41
1,778.03
1,666.32
1,549.03
1,425.88
1,296.56
1,160.78
1,018.22
868.52
711.34
546.30
373.01
191.05

$1,512.13
$1,587.74
$1,667.12
$1,750.48
$1,838.00
$1,929.90
$2,026.40
$2,127.72
$2,234.10
$2,345.81
$2,463.10
$2,586.25
$2,715.57
$2,851.35
$2,993.91
$3,143.61
$3,300.79
$3,465.83
$3,639.12
$3,821.08

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

Loan Balance
(Previous Balance-Loan Reduction)
50,000.00
48,487.87
46,900.13
45,233.01
43,482.53
41,644.53
39,714.63
37,688.23
35,560.51
33,326.41
30,980.60
28,517.50
25,931.25
23,215.68
20,364.33
17,370.42
14,226.81
10,926.02
7,460.20
3,821.08
0.00