To calculate the present value of an annuity due the formula is: $$P V _ { D } = C \times \left[ \frac { 1 - \frac { 1 } { ( 1 + i ) ^ { n + 1 } } } { i } + 1 \right]$$

Question

Quizplus · Accepted Answer

The correct formula for the present value of an annuity due is: $$PV_{D} = C \times \left[ \frac { 1 - \frac { 1 } { ( 1 + i ) ^ { n } } } { i } \right] \times (1 + i)$$. The formula provided in the question incorrectly suggests an adjustment for $n + 1$ periods instead of $n$ and does not correctly apply the adjustment for payments at the beginning of each period.

To Calculate the Present Value of an Annuity Due the Formula