FINANCIAL MANAGEMENT:

TABLE 9.4Present Value Interest Factor (PVIFA) for a $1 Ordinary Annuity

Year5%6%7%8%9%10%
 10.9520.9430.9350.9260.9170.909
 21.8591.8331.8081.7831.7591.736
 32.2732.6732.6242.5772.5312.487
 43.5463.4653.3873.3123.2403.170
 54.3294.2124.1003.9933.8903.791
 65.0764.9174.7674.6234.4864.355
 75.7865.5825.3895.2065.0334.868
 86.4636.2105.9715.7475.5355.335
 97.1086.8026.5156.2475.9955.759
107.7227.3607.0246.7106.4186.145

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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