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The question we wish to consider now's: How would we work out the present value of an annuity? See that the second equation has no P in it, so we cannot just address for P as we did in the very first equation. In a sense, We'll think about equally equations together by thinking about the following circumstance.

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If you fix the equation higher than for m, you can calculate the size of the regular payment once you know navigate to these guys the scale of the loan (existing worth) and one other expected parameters. When solved for m, this equation is known as the payout annuity formulation