The present value annuity calculator is probably the most useful calculator there is to help with annuity investments. The concept of present value used in the present value annuity calculator is very useful but many people are confused by this concept.



First of all, let's define what present value is. Present value, as used in the present value annuity calculator is the value on a given date of a future annuity payment or series of future annuity payments, discounted back to reflect the time value of money and other factors such as investment risk.

The present value annuity calculator is not the only use of present value. Many other business applications also use present value to calculate and compare cash flows at different times. Present value calculations are useful in real estate, insurance, as well as general investments.

You can use a present value annuity calculator online or you can down load it and install on your computer for use even when you are not connected to the Internet. Using the present value annuity calculator is simple. You can even get the formula used in the present value annuity calculator and do your own calculation by hand.

The present value annuity calculator uses what we call the discount factor to calculate the present value. The discount factor is given the reciprocal of one plus a rate of return. There are a few ways to calculate the discount factor. The present value, given the discount factor is just expected payoff in one year times the discount factor.

Another factor that is important in the present value annuity calculator is the rate of return. The rate of return can be called by many names such as the discount rate and the hurdle rate but the most common name for the discount rate is the opportunity cost of capital.

People call the rate of return by many names. Some of the names for the rate of return are discount rate, hurdle rate and the opportunity cost of capital. It is called the opportunity cost because it is the return forgone by investing in one project rather than in securities.

The more common use of the present value annuity calculator is to calculate the net present value rather than just the present value. When calculating the net present value, the present value annuity calculator uses the required investment in its calculation.

Many people found the concept of present value complicated which is why they prefer to use the present value annuity calculator to do their annuity calculations. The present value annuity calculator will help you understand your annuity investments as well as help you decide if an annuity is right for you.