The formula to calculate the reverse annuity is:
\[ \text{IV} = \frac{\text{FV}}{1 + \frac{\text{AR}}{100}} \]
Where:
The reverse annuity calculation is used to determine the initial value needed to achieve a desired final value, given a specific annuity rate. This concept is commonly used in finance to determine the present value of an investment that will grow at a specified rate over a period of time.
Let's assume the following values:
Using the formula:
\[ \text{IV} = \frac{10000}{1 + \frac{5}{100}} = \frac{10000}{1.05} \approx 9523.81 \]
The Initial Value is approximately $9523.81.
Let's assume the following values:
Using the formula:
\[ \text{IV} = \frac{20000}{1 + \frac{7}{100}} = \frac{20000}{1.07} \approx 18691.59 \]
The Initial Value is approximately $18691.59.
