Structured Settlement Money Calculator

Present Value of Annuity Formula:

\[ PV = PMT \times \frac{1 - (1 + r)^{-n}}{r} \]

Periodic Payment (PMT):

currency units

Periodic Discount Rate (r):

decimal

Number of Periods (n):

unitless

Present Value (PV):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Structured Settlement Present Value Calculator?

The Structured Settlement Money Calculator calculates the present value of a structured settlement annuity using the standard present value of annuity formula. This helps determine the current lump-sum equivalent of future periodic payments.

2. How Does the Calculator Work?

The calculator uses the present value of annuity formula:

\[ PV = PMT \times \frac{1 - (1 + r)^{-n}}{r} \]

Where:

\( PV \) — Present value (currency units)
\( PMT \) — Periodic payment amount (currency units)
\( r \) — Periodic discount rate (decimal)
\( n \) — Number of periods (unitless)

Explanation: This formula discounts future cash flows back to their present value using the time value of money principle.

3. Importance of Present Value Calculation

Details: Present value calculations are essential for comparing structured settlements with lump-sum offers, financial planning, and making informed decisions about settlement options.

4. Using the Calculator

Tips: Enter the periodic payment amount, discount rate (as decimal, e.g., 0.05 for 5%), and number of payment periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a structured settlement?
A: A structured settlement is a financial arrangement where a claimant agrees to resolve a personal injury claim by receiving periodic payments over time rather than a single lump sum.

Q2: Why calculate present value?
A: Present value helps determine the current worth of future payments, allowing for comparison with lump-sum offers and informed financial decision-making.

Q3: How do I determine the discount rate?
A: The discount rate should reflect the opportunity cost of capital, typically based on current market interest rates for similar risk investments.

Q4: What if the discount rate is zero?
A: If the discount rate is zero, the present value is simply the sum of all future payments (PMT × n).

Q5: Can this calculator handle different payment frequencies?
A: Yes, but ensure the discount rate and number of periods match the payment frequency (monthly, quarterly, annually).