Q:

What is the ordinary annuity formula?

A:

Quick Answer

The ordinary annuity formula appears as "P = r (PV) / 1 - (1+R) - n." The formula is used to calculate the periodic payment against an annuity when the rate and payments remain the same, with the first payment exactly one period away.

Continue Reading
What is the ordinary annuity formula?
Credit: Cadalpe Collection Mix: Subjects Getty Images

Full Answer

In the formula, "P" represents the payment amount, while "PV" depicts the present value, or the initial payout. The rate per period is designated by "r," and "n" indicates the number of periods. Annuities with the first payment due immediately use the annuity due payment formula, while those with a payment scheduled more than one period away use the deferred annuity payment formula.

Learn more about Accounting

Related Questions

Explore