Annual Annuity Rate Calculator

Formula

The formula to calculate the Annual Annuity Rate (AAR) is:

\[ AAR = \left( \frac{PMT}{PV} \right) \times 100 \]

Where:

$ AAR $ is the Annual Annuity Rate (%).
$ PMT $ is the Annual Payment Amount ($).
$ PV $ is the Present Value of the Annuity ($).

What is Annual Annuity Rate?

The annual annuity rate measures the return on an annuity investment over a year. It is calculated by dividing the annual payment amount by the present value of the annuity and then multiplying by 100 to convert it to a percentage.

Example Calculation

Consider an example where:

Annual Payment Amount (PMT): $5000
Present Value of Annuity (PV): $50000

Using the formula to calculate the Annual Annuity Rate:

\[ AAR = \left( \frac{5000}{50000} \right) \times 100 = 10\% \]

This means that the annual annuity rate for this example is 10%.