Present Value and Future Value of Annuity Due

In an annuity due, the first cash flow occurs at the beginning (at time 0). We can use our BA II Plus calculator to calculate the present value and future value of the annuity due using the same procedure as above, just by making one minor adjustment.

By default the payment period in the calculator is set to END (End-of-period payments). However, for annuity due, the payment occurs at the beginning of the period. So, we need to change the payment period to the beginning BGN (Beginning-of-period payments). To make this change, follow the following steps:

On your calculator, press: [2ND][BGN][2ND][SET]

The mode is now changed to BGN and you will see BGN displayed on the upper right corner of the display.

To switch back to END mode, repeat the above steps. Once the mode is changed, BGN will disappear from the screen.

We will use the same examples as we used for ordinary annuity and calculate the PV and FV of the annuity due.

Future Value of an Annuity Due

An annuity due pays $500 every year for the next 5 years. The expected rate of return is 8%. The future value of this annuity can be calculated as follows:

 Calculator Usage
 Since it’s an annuity due, we should set payment period to beginning-of-period payments [BGN].
Enter PMT = $500, N = 5, I/Y = 8%.
Since compounding frequency is 1, set Number of Compounding Periods (C/Y) to 1 by pressing [2nd][P/Y][Down Arrow].
To compute the future value, press the key CPT > FV
FV = $3167.965

Present Value of an Annuity Due

Calculate the present value of an ordinary annuity that pays $500 at the end of each year for the next 5 years. The discount rate is 8%.

 Calculator Usage
 This can be calculated using the TVM functions of BA II Plus calculator as follows:
PMT = 500
N = 5
I/Y = 8%
To compute present value, press the key CPT > PV.
PV = $2,156.063

Related Downloads

Data Science in Finance: 9-Book Bundle

Data Science in Finance Book Bundle

Master R and Python for financial data science with our comprehensive bundle of 9 ebooks.

What's Included:

  • Getting Started with R
  • R Programming for Data Science
  • Data Visualization with R
  • Financial Time Series Analysis with R
  • Quantitative Trading Strategies with R
  • Derivatives with R
  • Credit Risk Modelling With R
  • Python for Data Science
  • Machine Learning in Finance using Python

Each book includes PDFs, explanations, instructions, data files, and R code for all examples.

Get the Bundle for $29 (Regular $57)
JOIN 30,000 DATA PROFESSIONALS

Free Guides - Getting Started with R and Python

Enter your name and email address below and we will email you the guides for R programming and Python.

Data Science in Finance: 9-Book Bundle

Data Science in Finance Book Bundle

Master R and Python for financial data science with our comprehensive bundle of 9 ebooks.

What's Included:

  • Getting Started with R
  • R Programming for Data Science
  • Data Visualization with R
  • Financial Time Series Analysis with R
  • Quantitative Trading Strategies with R
  • Derivatives with R
  • Credit Risk Modelling With R
  • Python for Data Science
  • Machine Learning in Finance using Python

Each book comes with PDFs, detailed explanations, step-by-step instructions, data files, and complete downloadable R code for all examples.