Present Value Interest Factor of Annuity (PVIFA)

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Definition of 'Present Value Interest Factor of Annuity (PVIFA)'

The present value interest factor of annuity (PVIFA) is a financial concept that is used to calculate the present value of a series of equal cash flows. The PVIFA is calculated by taking the present value of an annuity formula and solving for i, the interest rate.

The PVIFA is used in a variety of financial applications, such as calculating the present value of a bond, the present value of a lease, or the present value of a pension.

The PVIFA is a useful tool for financial analysts because it allows them to compare the present value of different investment options. By knowing the PVIFA for each investment, an analyst can determine which investment has the highest present value and, therefore, the best return on investment.

The PVIFA is calculated using the following formula:

PVIFA = [1 - (1 / (1 + i)^n)] / i


* PVIFA is the present value interest factor of annuity
* i is the interest rate
* n is the number of periods

For example, if you are investing $100 per year for 10 years at an interest rate of 5%, the PVIFA would be 6.1446. This means that the present value of your investment would be $614.46.

The PVIFA is a powerful tool that can be used to make informed financial decisions. By understanding the PVIFA, you can make better choices about how to invest your money.

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