Annuities

Annuities

A sequence of equal payments made/received at equal intervals of time is called annuity. The amount of regular payment of an annuity is called periodic payment. The time interval between two successive payments is called payment interval or payment period. Note that, the payment period may be annual, half yearly, quarterly, monthly (or) any fixed duration of time. The time interval between the first payment and the last payment of an annuity is called term of an annuity.

The sum of all payments made and interest earned on them at the end of the term of annuities is called future value of an annuity. The present or capital value of an annuity is the sum of the present values of all the payments of the annuity at the beginning of the annuity of purchase the payments due in future. Here we note that unless mentioned specifically, the payment means yearly payment.