Many investments are paid out on a monthly, quarterly or yearly basis instead of in a lump sum. Calculating the amount of money you will receive for each payment can be completed following several mathematical computations. Some examples of investments that pay you on a periodic basis include retirement plans and financial settlements. If you are lucky enough to win a large annuity in the lottery, it is computed this way as well.
Things You'll Need
- Present value of the annuity
- Interest rate
- Number of payments you will receive
Determine your monthly interest rate. To do this you will need to divide your annual interest rate you are earning on your annuity by 12. For this example, let's assume your annual interest rate is 6 percent. This means your monthly interest rate is 1/2 percent, or .005.
Add one to your monthly interest rate and then multiply it by itself the number of times as the number of payments you will receive for your annuity. For this example, we will use a basic calculation where your annuity will be received over one year, paid monthly. This means you will receive 12 payments. In this example 1.005 is multiplied by itself 12 times, equaling 1.0616.
Subtract one from the result you received in step 2. In this example the calculation would be 1.0616 - 1, which equals .0616.
Divide your result in step three by your monthly interest rate, which is .005 in decimal form. The calculation in this example is .0616 / .005, which equals 12.32.
Divide the amount of money you are expected to receive at the end of the annuity by the result in step four. In this example we are calculating the payments you will receive on a monthly basis for a $5,000 annuity. The calculation would be $5,000 / 12.32, which equals $405.84