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(^40) Financial Management
Step 4: Insert the values as given in the example. Here r = I = 0.05, Nper is the number
of periods = 20, Pmt is the periodic annuity (how to use it we will see a little later) = 0
in this case as there is no annual payment except the first one. Fv is the future value =
Rs 2,00,000 in this case and Type is a value representing the timing of the payment = 0
in this case. Putting these values we get the following screen.
Note that the result of the figures that you input is shown in the formula result section
where it is Rs 75,377.89. Compare this with the figure that you get from using the value
from the table, a difference of Rs 2.11. Negligible, but still higher than the differences
we used to get in the future value. Can you tell why? This is because of the fact that
while dividing you require numbers more than four digits to get accuracy.
What if the money was payable at the start of the period rather than at the end of the
period? Here it does not matter as there is only one future value and that is also at the
start of the first period. It would matter when we look at the present value of the
annuity.
Present Value of an Annuity
The present value of an annuity can be calculated by:













+

= + -

n

n

i i

esentValue A i

( 1 )

Pr [(^1 )^1 ]

Or to use the tables the change would be:

Present Value = Annuity * (Present Value Annuity Factor n,i)

Let us see an example

Example

You have been promised an annual grant of Rs 7000 every year for the next 20 years