- 1). Divide the annually compounded interest rate by the number of payments per year (if you're not given the interest accumulated between consecutive payments). Either one gives you your "i" value. If the interest is compounded at the time of every payment, "i" is found using the formula (1+annual rate)^(1/m)=1+i, if "m" is the number of payments per year.
- 2). Set PMT to the periodic payout of the annuity. Set "n" to the number of payments left. The formula above does not include payments less than a pay period away in calculating the present value.
- 3). Plug your numbers into the formula PMT*[1-1/(1+i)^n]/i and solve to find the present value for the annuity. Again, the asterisk [*] indicates multiplication, and the caret [^] indicates that "n" is an exponent.
- 4). Calculate different present values at different interest rates by repeating Step 3 with different values for "i."
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