Note that the last annuity payment occurs on the last day of the investment horizon.

Thus, it earns no interest (i.e., the future value interest factor takes a power of zero).

Similarly, the first annuity payment earns only five years of interest. Thus, the future value interest factor takes a power of five. Accordingly, in the future value interest factor of annuity term, j runs from 0 to t − 1, or, in this example, (6 − 1 =) 5. In Example 2–7, note that the first annuity payment earns one year of interest. Thus, the present value interest factor term takes a power of one. Likewise, the last annuity payment earns six years of interest. Thus, the present value interest factor takes a power of six. Accordingly, in the present value interest factor of annuity term, j runs from 1 to t.