The formula to find the present value of an annuity is: C x [1-[1/(1+i)n]]/i. "C" represents the dollar amount of each payment received. The letter "i" represents the rate of interest. The letter "n" represents the total number of payments received periodically.
Calculating the present value of an annuity gives an illustration of what the annuity is worth in the future using the current dollar value. Worth is largely determined by money's time value and this is taken into consideration when investing. Interest values may also be considered when calculating annuity; the value of the original money invested decreases as time passes.