PVADn = R/(1 + i)0 + R/(1 + i)1 + ... + R/(1 + i)n–1 = PVAn (1 + i)

PVADn = R/(1 + i)0 + R/(1 + i)1 + ... + R/(1 + i)n–1 = PVAn (1 + i)

• PVADn = R/(1 + i)0 + R/(1 + i)1 + ... + R/(1 + i)n–1 = PVAn (1 + i)

• R R R R

• 0 1 2 n–1 n

• PVADn

• R: Periodic
• Cash Flow

• i%

• . . .

• Overview of an Annuity Due – PVAD

• Cash flows occur at the beginning of the period

PVADn = $1,000/(1.07)0 + $1,000/(1.07)1 + $1,000/(1.07)2 = $2,808.02

• PVADn = $1,000/(1.07)0 + $1,000/(1.07)1 + $1,000/(1.07)2 = $2,808.02

• $1,000.00 $1,000 $1,000

• 0 1 2 3 4

• $2,808.02 = PVADn

• 7%

• $ 934.58

• $ 873.44

• Example of an Annuity Due – PVAD

• Cash flows occur at the beginning of the period

• PVADn = R (PVIFAi%,n)(1 + i)
• PVAD3 = $1,000 (PVIFA7%,3)(1.07) = $1,000 (2.624)(1.07) = $2,808

• Valuation Using Table IV

• N

• I/Y

• PV

• PMT

• FV

• Inputs

• Compute

• 3 7 –1,000 0

• 2,808.02

• Complete the problem the same as an “ordinary annuity” problem, except you must change the calculator setting to “BGN” first. Don’t forget to change back!
• Step 1: Press 2nd BGN keys
• Step 2: Press 2nd SET keys
• Step 3: Press 2nd QUIT keys

• Solving the PVAD Problem