MAT.116
4.2
Definitions for Annuities
Annuity
Term
Annuity Certain
Perpetuity
Contingent Annuity
Payments
Ordinary Annuity
Annuity Due
Simple Annuity
Complex Annuity
Annuity
An annuity is a sequence of payments made at regular time intervals.
Term
The time period in which these payments are made is called the term of the annuity.
Annuity Certain
An annuity where the term is a fixed time interval.
Perpetuity
An annuity with a definite beginning date but no ending date.
Contingent Annuity
An annuity with a term that is not fixed in advance.
Payments
Payments in an annuity need not be equal, but we will choose to assume they are.
Ordinary Annuity
An ordinary annuity is an annuity where the payments are made at the end of each payment period.
Annuity Due
An annuity due is an annuity where the payments are made at the beginning of each payment period.
Simple Annuity
If the payment periods and interest conversion periods coincide, the annuity is called a simple annuity.
Complex Annuity
If the payment periods and interest conversion periods do not coincide, the annuity is called a complex annuity.
A formula which calculates the current, or present, value of an ordinary, certain, simple annuity with equal payments.
A formula which calculates the accumulated, or future, amount of an ordinary, certain, simple annuity with equal payments.
Regular deposits to a savings accountMonthly home mortgage paymentsMonthly insurance paymentsRetirement plans like IRAs, Keogh plans, and SEP plansAfter-tax-deferred annuities