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The reason being the value of money appreciates over time provided the interest rates remain above zero. The two factors needed to calculate the present value factor are the time period and the discount rate. The reason for this is that the value of money appreciates over time.
Andrew holds a Bachelor’s degree in Finance and a Bachelor’s degree in Political Science from the University of Colorado and specializes in finance, real estate, and life insurance. Calculate the present value interest factor of annuity using our PVIFA calculator. This calculator will compute a present value interest factor , given the periodic interest rate and the number of periods. This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation.
Present Value Interest Factor (PVIF): Definition, Formula & Example
The PVIF is commonly used to simplify the process of calculating present values. If you liked our tools please give a thumbs up to our Facebook page and share it with your friends. The PVIF Calculator is used to calculate the present value interest factor.
The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. From the above calculations, we can establish that the present value of $1200 is less than $1000. Therefore, Company S should choose to receive $1000 today rather than waiting for 2 years. This will be the present value of $1200 when it is discounted at a rate of 10% for 2 years. This states that a dollar that you have today is worth more than a dollar you’d have tomorrow.
Present Value Interest Factor Example Problem
For this problem, the time period being analyzed is 5 years long, which is equal to 5 periods. To calculate an annuity’s present value interest factor, enter the required values in our PVIFA calculator, and it will display the answer on the screen. For more advanced present value calculations see our other present value calculators. See the Present Value of a Dollar calculator to create a table of PVIF values.
PVIFA is a term used in the fields of economics, finance, and accounting. PVIFA stands for the present value of interest factor of the annuity. An annuity due is one that has a payment due at the start of the payment interval.
Discounted Cash Flow (DCF)
The acronym PVIFA stands for “present value interest factor of annuity.” Identify and write down the interest pvif calculator rate per period and number of period. Present value interest factors are commonly used in analyzing annuities.
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