
Present Value of Annuity is the
concept that receiving money now is worth receiving the same ammount in the
future. Using this logic receiving a lump sum today is worth receive the same
overall ammount in payments as it allows you to immediately invest the full
sum. Using the example below of $500
per year at 5% for 10 years, the receiving sum of $3,860.87 would have the same value to you
as receiving $500 per year for 10 years.
If you can currently receive a better interest rate than quoted then
it is better to receive the Present Value now and reinvest to make a profit.

