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Why You Should Use a Present Value Annuity Calculator
submitted: Oct 17th 2008 |
by: RandallCunningham
Total views: 50 |
Word Count: 486 |
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Many annuity investors find the present value annuity calculator to be very useful. While the concept of present value can be difficult to understand, the present value annuity calculator is quite simple to use and can give you the answers you want in an instant.
The definition of present value, as used in the present value annuity calculator, is the value of a given date of a future payment or payments. In the case of the present value annuity calculator, it is the value of future annuity payment or series of future annuity payments discounted taking into account the time value for money as well as many other factors.
The present value annuity calculator uses the present value calculation and applies it to annuities. However, there are plenty of other uses of the present value calculation in other financial fields such as real estate and insurance. Other present value calculators use the calculation to calculate and compare cash flows at various stages of investment.
Investors can either use the present value annuity calculator online whenever they want to calculate annuity payments or they can download the present value annuity calculator application and install it as a desktop application for use whenever they want even when they are not connected to the Internet. Each present value annuity calculator can have different interfaces and you have to learn about the interface of the present value annuity calculator you choose before you use it.
The discount factor is used in the present value annuity calculator to calculate present value. The discount factor is expressed as the reciprocal of one plus a rate of return. If you know the discount factor, then the present value is simply the discount factor multiplied by expected payoff in one year.
The rate of return is one of the most important input in the present value annuity calculator. The rate of return is similar to interest rate. It is the reward that investors get for investing the money and getting paid on a later date. The discount factor uses the rate of return in its calculation.
The rate of return used in the present value annuity calculator can have many names. Among the names given to the rate of return are discount rate, hurdle rate, and opportunity cost of capital. No matter what the name is, the rate of return is very important in calculating the present value.
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.
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Article Source: Unique Financial Articles
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