In economics, present value interest factor (PVIF) is used in finance theory to refer to the output of a calculation, used to determine the monthly payment needed to repay a loan. The calculation involves a number of variables, which are set out in the following description of the calculation:
Formula Let: = the amount borrowed (loan) = the effective (i.e. convertible annually) annual interest rate charged = the number of years over which the loan will be outstanding = the annual amount of the fixed regular payments that will amortize (i.e. repay) the loan = the frequency of these regular payments, e.g. m = 2 means the payments are half-yearly.
Then:
where
In its simplest form, PVIF is calculated using the formula:
where is the discount rate (or interest rate) and is the number of periods.
See also Time value of money Life annuity Fixed-rate mortgage Amortization calculator
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