As the time period until receipt increases, the present

value

An annuity may best be defined as

The concept of present value is a sum payable in the

present is worth less in the future than in the stated amount today.

Babe Ruth Jr. has agreed to play for the Cleveland Indians

for $3 million per year for the next 10 years. What table would you use to

calculate the value of this contract in today's dollars?

The higher the interest rate used in determining the future

value of a $1 annuity,

The amount of annual payments necessary to accumulate a

desired future total can be found by reference to the present value of an

annuity table.

To calculate "Future or Present Values of an

"Annuity Due," we must assume that payments happen twice as often.

The time value of money concept is fundamental to the

analysis of cash inflow and outflow decisions covering multiple periods of

time.

In paying off a mortgage loan, the amount of the periodic

payment that goes toward the reduction of principal increases over the life of

the mortgage.