Answer
The interest rate is added to one and then multiplied by the "present value of the ordinary annuity factor" to get the "present value of the annuity due factor". For example, in the case of an annuity due factor of 6% that is paid for twenty periods, the annuity due factor is computed as follows:
PVF-OA for 6% at 20 periods=11.46992
Annuity due factor = (1 + 0.06) x 11.46992
=12.1581
Work Step by Step
The interest rate is added to one and then multiplied by the "present value of the ordinary annuity factor" to get the "present value of the annuity due factor". For example, in the case of an annuity due factor of 6% that is paid for twenty periods, the annuity due factor is computed as follows:
PVF-OA for 6% at 20 periods=11.46992
Annuity due factor = (1 + 0.06) x 11.46992
=12.1581
