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TABLE 9.4Present Value Interest Factor (PVIFA) for a $1 Ordinary Annuity
Year | 5% | 6% | 7% | 8% | 9% | 10% | |
1 | 0.952 | 0.943 | 0.935 | 0.926 | 0.917 | 0.909 | |
2 | 1.859 | 1.833 | 1.808 | 1.783 | 1.759 | 1.736 | |
3 | 2.273 | 2.673 | 2.624 | 2.577 | 2.531 | 2.487 | |
4 | 3.546 | 3.465 | 3.387 | 3.312 | 3.240 | 3.170 | |
5 | 4.329 | 4.212 | 4.100 | 3.993 | 3.890 | 3.791 | |
6 | 5.076 | 4.917 | 4.767 | 4.623 | 4.486 | 4.355 | |
7 | 5.786 | 5.582 | 5.389 | 5.206 | 5.033 | 4.868 | |
8 | 6.463 | 6.210 | 5.971 | 5.747 | 5.535 | 5.335 | |
9 | 7.108 | 6.802 | 6.515 | 6.247 | 5.995 | 5.759 | |
10 | 7.722 | 7.360 | 7.024 | 6.710 | 6.418 | 6.145 |
Further examination of Table 9.4 shows how the present value of a $1 annuity decreases with various combinations of interest rates and time periods. For example, if $1,000 is paid at the end of each year (beginning with year one) for ten years at an 8% interest rate, the present value of the annuity would be $6,710 ($1,000 × 6.710). If the interest rate is 10% for ten years, the present value of the annuity would be $6,145 ($1,000 × 6.145). These results demonstrate the costs of higher interest rates on the present values of annuities.
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