How To Calculate The Present Value Of An Annuity Due By Hand In Excel Explained

In this video we discuss how to calculate the present value of an annuity due by hand in excel. We go through a detailed example step by step showing how to do this
Transcript/notes
Here is the formula to calculate the present value of an annuity due, with all of the variables listed. We are going to go through how to input this formula into excel.
As an example, let’s say that someone expects to receive payments of $500 at the beginning of each quarter for the next 6 years. Interest is 5% annually. Since the payments are received at the beginning, this is an annuity due. What is the present value of the annuity?
We are going to put the answer in cell B8, so we left click on cell B8, so it is highlighted. Next, we type in an equals sign, then, following the formula, we left click on the payment amount, cell B2. From here we type in a multiplication sign, which is shift 8 on the keyboard. Next, we type in 2 open parentheses, then we type in a 1. From here, we type in a minus sign, then another open parenthesis. Next, we type in a 1, then we type in a division sign, which is a forward slash in excel. From here we type in 2 open parentheses, then we type in another 1.
Next, we type in an addition sign followed by another open parenthesis. Now we need to left click on the rate, cell B3, then type in another division sign. From here, we need to left click on the number of compounding periods, cell B4, then we type in 2 closed parentheses. Next, we type in a to a power symbol, or carrot sign, which is shift 6 on the keyboard, and then we type in an open parenthesis.
Now we need to left click on the number of compounding periods, cell B4, then type in a multiplication sign. Next, we left click on the time, cell B5, and then we type in 4 closed parentheses. From here, we type in a division sign, followed by an open parenthesis. Then we left click on the rate, cell B3, and then type in another division sign. Next, we left click on the number of compounding periods, cell B4, and then we type in 2 closed parentheses. From here, we type in a multiplication sign, and then type in an open parenthesis.
Now, we type in a 1, followed by an addition sign. Next we type in an open parenthesis, then we need to left click on the rate, cell B3. From here we type in a division sign, then we need to left click on the number of compounding periods, cell B4. Then, we type in 2 closed parentheses to close off the function. And finally, we hit the enter key, and we have our answer of $10,441.02 rounded off.
Here is another example, where n, the number of compounding periods is 1, and the payment amounts are $8000, I will hit the enter key and we get $22,266.12 rounded off as the present value of the annuity.
Chapters/Timestamps
0:00 Formula for present value of an annuity due
0:10 Example set up
0:23 Start how to calculate the present value of an annuity due in excel
2:23 Answer, final formula in excel
2:38 Another example

[@Syedmaqsoodaliofficial]

Your explanation is much understandable than other lectures

[@intelligentguy7627]

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