Categorieën: Alle - examples - payments - value

door David Kedrowski 14 jaren geleden

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MAT.116 4.2

Annuities are financial instruments characterized by a sequence of regular payments made over specified periods. These payments can be structured in various ways, such as being made at the beginning or end of each period, leading to different types like annuity due or ordinary annuity, respectively.

MAT.116 4.2

MAT.116 4.2

Examples of Annuities

  • Regular deposits to a savings account
  • Monthly home mortgage payments
  • Monthly insurance payments
  • Retirement plans like IRAs, Keogh plans, and SEP plans
  • After-tax-deferred annuities
  • Future Value of an Annuity

    A formula which calculates the accumulated, or future, amount of an ordinary, certain, simple annuity with equal payments.

    Present Value of an Annuity

    A formula which calculates the current, or present, value of an ordinary, certain, simple annuity with equal payments.

    Ordinary, certain, simple annuities with equal payments

    Definitions for Annuities

    Payments

    Payments in an annuity need not be equal, but we will choose to assume they are.

    Complex Annuity

    If the payment periods and interest conversion periods do not coincide, the annuity is called a complex annuity.

    Simple Annuity

    If the payment periods and interest conversion periods coincide, the annuity is called a simple annuity.

    Annuity Due

    An annuity due is an annuity where the payments are made at the beginning of each payment period.

    Ordinary Annuity

    An ordinary annuity is an annuity where the payments are made at the end of each payment period.

    Term

    The time period in which these payments are made is called the term of the annuity.

    Contingent Annuity

    An annuity with a term that is not fixed in advance.

    Perpetuity

    An annuity with a definite beginning date but no ending date.

    Annuity Certain

    An annuity where the term is a fixed time interval.

    Annuity

    An annuity is a sequence of payments made at regular time intervals.