Differentiate between deferred annuities and annuities that are not deferred. Present Value of an Annuity 6. An annuity problem involves a value that represents a single sum of money. This value may occur either before or after the rents. Consequently, we have an amount of an annuity problem.
Future value is a current amount that is increased in the future by interest compounding.
The future value is equal to the sum of the rents plus the accumulated compound interest amounts. Consequently, we have a present value of an annuity problem. Present value is a future amount that is decreased from the future to the present by compound interest discounting. The present value is equal to the sum of the rents less the accumulated compound interest amounts. Determining if an annuity problem involves an ordinary annuity or an annuity due A. Future value problems - Note the timing of the final rent in relation to the future value.