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PVIFA calculator is used to calculate the present value interest factor of an annuity by taking the rate of interest and number of period from the user. This calculator provides very accurate results considering the values it generates are used in the field of finance. In this post, we will discuss PVIFA, its formula, and how to use the PVIFA calculator.
How to use our PVIFA Calculator?
To use the PVIFA calculator, follow the steps below:
- Enter the rate of interest r in the given input box.
- Enter the number of period n in the next input box.
- Press the Calculate button to see the result.
The present value interest factor of annuity calculator takes no time in calculating PVIFA value. It will instantly provide you the PVIFA value based on the input given by the user. You can also use our annuity depreciation calculator to calculate the depreciation.
What is PVIFA?
PVIFA stands for the present value interest factor of an annuity. It is a metric that can be used to calculate a number of annuities' present value. The initial amount earns interest at a regular rate r, which funds a series of n successive withdrawals. Let's explore the formula to calculate PVIFA in the next section.
PVIFA formula can be written as:
In this equation:
n refers to the number of period, and
r refers to the interest rate per period.
How to calculate PVIFA?
PVIFA can be calculated using the above PVIFA equation. All we need is the interest rate per period and the number of period to calculate PVIFA. Follow these steps to calculate PVIFA using the above formula.
- Identify and write down the interest rate per period and number of period.
- Write the formula of the PIVFA.
- Substitute all values in the above formula to get PVIFA.
Let's calculate the present value interest factor of an annuity by using an example.
What will be the present value interest factor of annuity (PVIFA) if there are 5% interest rate and a 10 years of term period?
Step 1: Identify and write down the values of interest rate and the number of period.
r = 5%
n = 10 years
Step 2: Write down the PVIFA formula.
Step 3: Substitute the values of interest rate and the number of period in the above formula. After calculating, we get:
PVIFA = 7.72
Applications of the PVIFA
The present value interest factor of annuity (PVIFA) has a lot of applications. It is used in the field of finance, and most often PVIFA is used in one of the following cases:
- Estimate loan payments regularly irrespective of their type. The payment is made in two parts: principal amount and interest.
- Predicting a sequence of annuities' current value.
- Computing the present value of a normal annuity.
What does PVIFA mean?
PVIFA stands for the present value interest factor of an annuity. It is a metric that can be used to calculate a number of annuities' present value. The initial amount earns interest at a regular rate r, which funds a series of n successive withdrawals.
How do you calculate IRR with PVIFA?
IRR can be calculated with PVIFA by using the following formula:
PV = PMT * [(1-(1+r)-n)/r]
In this equation:
r, which is the rate of interest, is considered as investments internal rate of return (IRR)
PMT refers to each payment you receive, and
n is the number of period.
To calculate IRR with PIVFA, calculate the value of r in the above equation by substituting the remaining values in the equation.
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