What Is an Annuity?
In finance math an annuity is a series of equal payments at regular intervals; in insurance it is also a contract paying regular income.
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1.What is an annuity in finance math?
In finance math an annuity is a series of equal payments at regular intervals; in insurance it is also a contract paying regular income.
2.Ten yearly payments of 1,000 at 5 percent. About what is their present value?
Each payment shrinks in value; the whole series is worth about 7,722 today.
3.What is the future value of those ten payments at 5 percent, measured at the end of year ten?
If each 1,000 earns 5 percent until the end of year ten the pile grows to about 12,578, like a savings plan.
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Sources (3)
- FINRA: Annuities (Investment Products)
- National Association of Insurance Commissioners (NAIC): Annuities (CIPR Topics)
- Eigene Berechnung (synthetisches Rechenbeispiel
Education only. Not financial advice.