The present value of an annuity table provides a "shortcut" for calculating the present value of a steady stream of payments, denoted as A. The same value can be calculated directly from the following equation:
$$\mathrm { PV } _ { \mathrm { A } } = \mathrm { A } \left[ \frac { 1 } { ( 1 + i ) } \right] ^ { 1 } + \mathrm { A } \left[ \frac { 1 } { ( 1 + i ) } \right] ^ { 2 } + \ldots \mathrm { A } \left[ \frac { 1 } { ( 1 + i ) } \right] ^ { n }$$

Question

The present value of an annuity table provides a "shortcut" for calculating the present value of a steady stream of payments, denoted as A. The same value can be calculated directly from the following equation:
 $$\mathrm { PV } _ { \mathrm { A } } = \mathrm { A } \left[ \frac { 1 } { ( 1 + i ) } \right] ^ { 1 } + \mathrm { A } \left[ \frac { 1 } { ( 1 + i ) } \right] ^ { 2 } + \ldots \mathrm { A } \left[ \frac { 1 } { ( 1 + i ) } \right] ^ { n }$$

Quizplus · Accepted Answer

The equation provided is a direct method for calculating the present value of an annuity, where A represents the annuity payments, i represents the interest rate per period, and n represents the number of periods. This formula sums the present value of each individual payment over n periods, which is exactly what the present value of an annuity calculation entails.

The Present Value of an Annuity Table Provides a "Shortcut