PA is the present value of annuity: the present value of annuity is the present value of the equivalent face value of these receipts and payments to the present when the future value, interest rate (here we default to annual interest rate) and the number of interest-bearing periods n are known, taking into account the time value of money. For example, installment credit purchase, installment loan repayment and so on.

PV is the present value of compound interest: the present value of compound interest is a symmetrical concept of the final value of compound interest, which refers to the present value of specific funds calculated according to compound interest in a certain period of time in the future, or the principal needed to obtain a certain future principal and present principal. It can also be considered as the actual payment ability of these denominations in the future (regardless of inflation).

Extended data:

Present value function of annuity

1, calculate the monetary value.

Knowing the annuity and the coefficient, calculating the present value of the annuity and getting the monetary value at a certain point, this is the basic function of the present value of the annuity.

2. Comparison of investment schemes

According to different monetary values, the advantages and disadvantages of investment schemes/financing schemes can be compared.

3. Compare the advantages and disadvantages of these schemes.

By calculating the net present value (ANPV) of annuity, we can compare the schemes with different years and different total investment and financing.

Step 4 calculate the rate of return

IRR can be calculated by interpolation.

Calculation method of present value of compound interest

The present value calculation of compound interest refers to finding the present value p when the final value f, interest rate I and the number of periods n are known.

P=F/( 1+i)^n

In the above formula, [( 1+I)-n] is the coefficient that converts the final value into the present value, which is called the compound interest present value coefficient, or the compound interest present value 1 yuan, and is represented by the symbol (P/F, I, n). For example, (P/F, 10%, 5) represents the compound interest present value coefficient of five periods when the interest rate is 10%. In order to facilitate the calculation, a "table of present value coefficients of compound interest" can be compiled. The use method of this table is the same as that of "Compound Interest Final Value Coefficient Table".

Baidu Encyclopedia-Present Value of Annuity

Baidu Encyclopedia-Present Value of Compound Interest