Annuity

Present value of Annuity

For a given interest rate, payment frequency, and number of payments, the present value
annuity factor is the present value of an annuity at this rate, payment frequency, and number of payments if
each payment were $1

𝐹𝑉 = 𝑃𝑀𝑇(𝐴𝐹)
Present value annuity factor
Contoh N=36 dan i=0,35%pm/4.2%pa Pinjaman $8.000

1+𝑖 𝑛−1 1 + 0,0035 36 − 1

𝐴𝑓 = = = 38,29504816
𝑖 0,0035

𝐴𝐹 38,29504816
𝑃𝑉 𝐴𝐹 = 𝑛
= = 33.76891092
1+𝑖 (1 + 0.0035)36
FV=PV (1+i)N PV=payment (pvaf)
FV=$8.000 (1+0,0035)36 PV= payment x 33,76891092
FV=$8.000 x 1,13403267 $8.000=payment (33,76891092)
FV=$9.072,26 Payment=$8.000/ 33,76891092
Payment=$236,90
Payment
FV=payment (af)
$9.072,26=payment (38,29504816)
payment= $9.072,26/38,29504816
payment= $236,90
Present Value Annuity Factor Traditional Form
(1+𝑖)𝑛 −1 1
(1+𝑖)𝑛 −1 (1+𝑖)𝑛
• 𝑃𝑉 𝐴𝐹 = 𝑖
= 𝑖 1
(1+𝑖)𝑛
(1+𝑖)𝑛 (1+𝑖)𝑛

(1+𝑖)𝑛 −1
• PV AF =
𝑖(1+𝑖)𝑛

1
1−
(1+𝑖)𝑛
• PV AF =
𝑖

𝟏− 𝟏+𝒊 −𝒏
• 𝑷𝑽 𝑨𝑭 =
𝒊
PV AF traditional form
−𝑛
1− 1+𝑖
𝑃𝑉 𝐴𝐹 =
𝑖
− 36
1 − (1 + 0,0035)
𝑃𝑉 𝐴𝐹 =
0,0035
PV AF = (1 – 0.88180881)/0,0035
PV AF = 33,76891092
Finding present value
Cienna is thinking about buying a condominium. She figures that she
can afford monthly loan payments of $650, and that she would be
taking out a 30-year loan with an interest rate of 8.4%. On the basis of
these assumptions, what is the most she can afford to borrow? If she
has $7,500 to use as a down payment, what is the most she can afford
to pay for the condo?
Finding Total Interest For a Loan
Pat and Tracy are buying a house, and will need to take out a $158,000
mortgage loan. They plan to take out a standard 30-year mortgage
loan, on which their interest rate will be 7.2%. If they make all their
payments as scheduled, how much total interest will they pay over the
course of the 30 years?