How Do You Calculate An Annuity Value?
Several factors are needed to calculate an annuity value. An annuity is a series of payments over time based on an initial investment plus earned income. As such, calculating its value involves factoring in the time value of money. With each payment, the remaining principle in the annuity decreases, which also must be accounted for, but the remainder continues to earn interest. The value of the annuity is the total that can be withdrawn over time until the principle is exhausted. With the correct data, the present value of the annuity can be calculated using a fairly complex equation. Find the annuity payment amount. The first essential piece of information is the amount of each annuity payment. For a fixed annuity, the payment will remain constant. The payment amount of a variable annuity can fluctuate, so it should be averaged or otherwise discounted based on the expected changes in the payment amount. Get the interest rate. The annuity pays back on the initial investment at a fixed
