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Hi,
May I know how to use normal calculator to calcuate the annuity factor?
I know how to use calculator to calculate the discount factor only.
Discount factor : 10% (1/1.1 for 1st year, then /1.1 for 2nd year….)
Thanks in advance.
You need to be able to raise a figure to a power.
Annuity factor = 1/r x (1 – (1/(1+r))^n)
where ^ means raise to a power.
So if r = 8% and n = 4 years
Annuity factor = 1/0.08 x (1 – (1/(1.08))^4)
= 1/0.08 x (1 – 0.9259^4) = 1/0.08 x (1 – 0.7350) = 3.312
The button you need to raise to a power might be ‘x’ with a small square at its top right. Practice with small numbers like 3 raised to power 4 etc.
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