PV = pmt * ((1 - (1 + r) ^ (-n)) / r)
where r is the interest rate an n is the number of periods. HOJw do you
arrive to it?, well the PV of an infinite series of payments PMT =
PV= PMT/r
now you need to substract the value of the anunnuity from n to infinity
which is:
PV= (PMT/r)*(1/(1+r)^n) this is the PV of series form n to infinity
You are left with:
PV(annuity) = PMT/r - PMT/r*(1/(1+r)^n) which leads to the formula
above.
regards,
S.