#### Similar Calculator

## Frequently Asked Questions on an annuity

### What is an annuity?

An annuity is a series of equal payments made at equal intervals.

It is a sequence of periodic payments made at regular intervals

Examples of annuity are savings accounts, pension payments, hire purchase payment

### What is an ordinary annuity?

An ordinary annuity is a series of equal payments made at the end of each period.

It is a type of annuity where payment is made at the end of each payment interval.

Examples of ordinary annuity are monthly home mortgage payments and pension payments.

### What is an annuity due?

An annuity due is a series of equal payments made at the beginning of each period.

Examples of an annuity due are cell phone payments at the beginning of the period.

### What is deferred annuity?

A deferred annuity is an annuity that starts paying out at a later date, and not immediately.

### What is an immediate annuity?

An immediate annuity is an annuity whose payout phase starts immediately or one to two years after it comes into existence.

### What is the payment period?

The payment period of an annuity refers to between payments in the annuity.

It refers to the interval between payments in the annuity. These intervals may be monthly, quarterly, semi-annually or annually.

### What is annuity certain?

An annuity certain is an annuity where payments are to be made for a fixed period.

It is an annuity with a definite payment schedule.

Just as its name might suggest, annuity certain is not dependent on the occurrence of any contingencies.

### What is the term of an annuity?

The term of an annuity is the time from the start of the first payment period to the end of the last period of an annuity.

### What is a contingent annuity?

A contingency annuity is an annuity which has certain conditions that must be met before payments can be received.

As its names seem to suggest, a contingent annuity is contingent on the occurrence of an event.

### What is perpetuity?

A perpetuity is an annuity which continues forever. A perpetuity is a stream of payments that continues indefinitely.

That is, a perpetuity is a perpetual stream of payments

### What is the present value of an annuity?

The amount that, if invested at the beginning of the first period of an annuity, would be enough to pay out the annuity is the present value of the annuity.

To illustrate, suppose that for the next 7 years, €700 is deposited at the end of each year in an account that will earn 10% interest compounded annually.

The present value of the annuity would be the amount that must be deposited in one lump payment today to produce the same amount after 7 years, assuming the same interest rate.

### How do you calculate the present value of an ordinary annuity?

The present value of an ordinary annuity is calculated as follows:

$$PV=C\left[\frac{1-\left(1+\frac{i}{m}\right)^{-n m}}{\frac{i}{m}}\right]$$

### How do you calculate the present value of an annuity due?

The present value of an annuity due is calculated by adding the compounding frequency interest rate to the ordinary annuity formula.

It is represented as follows:

$$PV=C\left[\frac{1-\left(1+\frac{}{m}\right)^{-n m}}{\frac{i}{m}}\right]\left(1+\frac{i}{m}\right)$$

### What is PMT in Annuity?

The periodic cash flow that will be made in an annuity is denoted by **C or PMT** in the present value formula.

It is the cash flow to be made or received per period of the annuity.

### What is i in Annuity?

**i** in the present value formula represents the annual discounting rate, which is the rate at which a future accumulated sum of money is discounted into a certain present value of money.

### What is m in Annuity?

**m** in the present value formula represents the number of times a future accumulated sum of money is discounted in one year.

### What is n in Annuity?

Here, **n** refers to the number of periods or years an annuity is to be discounted.

## Post a Comment

## Post a Comment