# Present Value (PV) of an Annuity Due Calculator

LAST UPDATE: September 25th, 2020

## Definition – What is a Present Value (PV) of an annuity due?

The present value (PV) of an annuity due is the value today of a series of payments in the future. It uses a payment amount, number of payments, and rate of return to calculate the value of the payments in today’s dollars.

Compared with the present value of an annuity (which has the payment occur at the end of a period), an annuity due has the payment occur at the beginning of a period.

## Formula – how the Present Value of an Annuity Due is calculated

Present Value = (Annuity Payment ÷ Interest rate) x (1 – (1 ÷ (1 + Interest Rate)Number of Periods)) x (1 + Interest Rate)

Where:

• Payment” is the payment each period.
• Rate of Return” is a decimal rate of return per period (the calculator above uses a percentage). A return of 2.2% per period would be calculated in the formula as “0.022”.
• Number of Periods” is the number of periods (any payments).

### Example

We will receive \$100 each year for the next 10 years. The interest rate at the moment is 2.2% compounded annually. What is the present value of this annuity?

Present Value = (100 ÷ 0.022) x (1 – (1 ÷ (1 + 0.022)10)) x (1 + 0.022)

Present Value = 4545.4545 x (1 – (1 ÷ 1.02210)) x (1 + 0.022)

Present Value = 4545.4545 x (1 – (1 ÷ 1.243108)) x 1.022

Present Value = 4545.4545 x (1 – 0.804435) x 1.022

Present value = 4545.4545 x 0.195564 x 1.022

Present Value = 908.49

## FAQ

### What is the difference between an annuity due and an annuity?

The two are very similar. With an annuity, the payment occurs at the end of the period. With an annuity due, the payment occurs at the beginning of the period.

### What is the difference between an annuity due and a perpetuity?

An annuity due stops after a specific amount of time, a perpetuity goes on forever (in theory).

### What is the difference between the present value and future value of an annuity due?

The present value of an annuity due is the value of the annuity due in today’s dollars. The future value of the annuity due is the value of the annuity due on the date it is finished.