Which formula represents the calculation of the PVIFA?

The present value interest factor of an annuity (PVIFA) is used to calculate the present value of a series of equal payments made at regular intervals. The formula for PVIFA essentially discounts each payment back to the present value, accounting for a certain interest rate and number of periods.

The correct formula is represented as C( [1 - (1/(1+r)^t)]/r ). In this formula:

• C represents the amount of each cash flow or payment.

• r is the interest rate per period.

• t is the total number of periods.

This formula derives from the concept that when you receive a series of equal payments, the present value is the sum of the present values of all individual cash flows. Each payment is discounted to its present value by using the factor (1 + r) raised to the power of the time period, which reflects how future cash flows decrease in value as the time increases due to the time value of money.

The term (1 - (1/(1+r)^t)) captures the total effect of discounting over the entire period t, subtracting the future value factor of the payments to arrive at the net present value of the annuity stream. Dividing by the interest rate r effectively adjusts