Annuity
An annuity is a sequence of payments, usually equal, made at equal intervals of time. Premiums on insurance, interest payments, payments of rent are all annuities.
The Annuity calculation calculates annuities certain, i.e. when payments are made for a specified number of years, regardless of life or death of the annuitant.
For contingent payments, i.e. when payments are made on the condition that the annuitant is still alive, you should use the Whole Life Annuity or the Temporary Life annuity calculations.
Terminology
When payments are made at the end of each period, the annuity is called an ordinary annuity.
When payments are made at the beginning of each period, the annuity is called an annuity due.
A deferred annuity is when the series of payments starts at some later date.
When payment periods and compounding periods coincide, the annuity is called an ordinary annuity, otherwise it is called a general annuity.
Input
| • nominal annual rate | |
| • compounding frequency | |
| • payment frequency | |
| • number of payments or number of years | |
| • either: | |
| •
periodic payment amount • future value • present value |
|
| • number of periods before the first payment: | |
|
0 = annuity due 1 = ordinary annuity 2...n = deferred annuity |
|
Results
| Depending on the type of input amount: |
| • present value |
| • future value |
| • periodic payment |
| and |
| • total amount paid |
| • total interest |
To view the amortization schedule, select the Show Details command in the Calculation menu.
To toggle between date and period view, click the header
of the first details column.
Please note that in order to avoid eronneous interpretations,
the details table always displays period numbers and dates.
To change the start date, select the Start Date command in the Edit menu to open the Date Options dialog.
Examples
| • | A
sum of $300 is deposited quarterly into a savings account that pays interest
at 4 % compounded quarterly.
Answer: $6,605.70. |
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| • | You
want to make a deposit now into a savings account that pays interest at
4 % compounded annually. Five years from now you'll start a series of
five annual withdrawals of $1,000.
Answer: $3,805.44. |
Related topics
| Whole Life Annuity |
| Temporary Life Annuity |
| Nominal annual rate |
| Compound interest |
| Periodic Payments |