Dictionary of Business Terms: annuity factor
annuity factor
mathematical figure showing the present value of an income stream that generates one dollar of income each period for a specified number of periods.
Dictionary of Real Estate Terms: annuity factor
annuity factor
a mathematical figure that shows the present value of an income stream that generates one dollar of income each period for a specified number of periods.
Example: Collins is to receive $1,000 each year for 10 years for rental of her land. To value this income, she used an annuity factor at a 10% rate that is 6.144. The estimated rent has a present value of $6,144 (6.144 × $1,000).
| Annuity factor | = | 1- | 1 (1 + i)n |
| i |
where i is the periodic interest rate in decimal form and n is the number of periods that the income stream will last.
