ANNUITY Flashcards
A financial plan or deal
where regular payments
are made or received
over time such as
monthly or yearly.
ANNUITY
When the payments are
made at regular intervals,
like monthly or yearly,
and the interest (the extra
money you earn for
lending or saving) is
calculated at the same
frequency.
SIMPLE ANNUITIES
When the payments are
still regular, the interest is
calculated at a different
frequency. Maybe you
make monthly payments,
but the interest is
calculated yearly.0
GENERAL ANNUITIES
an annuity which
the payments are
made at the end
of payment
interval.
ORDINARY ANNUITIES
an annuity in which
the payments
extend over an
indefinite/
indeterminate
length of time
CONTINGENT ANNUITIES
an annuity in which the payments are made at beginning of each interval
ANNUITY DUE
an annuity in
which payments
begin and end at
definite times.
ANNUITY CERTAIN
THE FIXED AMOUNT OF MONEY PAID OR RECEIVED AT REGULAR INTERVALS
REGULAR OR PERIODIC PAYMENT (R)
THE TOTAL AMOUNT (SUM) OF ALL PAYMENTS MADE BY THE END OF THE ANNUITY PERIOD, INCLUDING INTEREST.
AMOUNT (FUTURE VALUE) OF AN ANNUITY (F)
SUM OF PRESENT VALUES OF ALL THE PAYMENTS TO BE MADE DURING THE ENTIRE TERM OF THE ANNUITY
PRESENT VALUE OF AN ANNUITY (P)
DISCOUNT RATE (IN DECIMAL)
ANNUAL INTEREST RATE (I)
a sum of money that is paid in regular equal payments
ANNUITY
Example:
Installment payments, monthly rentals, and life insurance premiums
ANNUITY
the period of time between consecutive payments
Payment Interval
Example:
God buys a new smartphone and agrees to pay it via installment. He will pay ₱1 500 every month for 2 years. In this case, the payment interval of the annuity is monthly.
Payment Interval
the time from the beginning of the first payment interval to the end of the last payment interval
Term
Example:
God buys a new smartphone and agrees to pay it via installment. He will pay ₱1 500 every month for 2 years. In this case, the term of the annuity is 2 years.
Term
It is an annuity payable for a definite duration. It means that this annuity begins and ends on a definite date.
Annuity Certain
Example:
Celongka buys a new laptop and agrees to pay through installment. She will pay ₱2 500 every month for 2 years.
Annuity Certain
It is an annuity payable over a term that has a definite start date but no definite end date.
Perpetuity
Example:
Payment of housing rent
Perpetuity
It is an annuity payable for an indefinite duration. It means that the beginning or the termination is dependent on some certain event.
Contingent Annuity
Example:
Insurance and pension payments
Contingent Annuity
It is an annuity certain whose compounding period is the same as the payment interval.
Simple Annuity
Example:
Leonard buys a brand-new TV with installment payment at the end of each month with interest compounded monthly.
Simple Annuity
It is an annuity certain whose compounding period is not the same as the payment interval.
General Annuity
Example:
Vijayjay buys a brand-new TV with installment payment at the end of each quarter with interest compounded annually.
General Annuity
It is an annuity in which the periodic payment is made at the end of each payment interval.
Ordinary Annuity
Example:
Sam buys a washing machine with installment payment at the end of every month for one year.
Ordinary Annuity
It is an annuity in which the periodic payment is made at the beginning of each payment interval.
Annuity Due
Example:
Gilly buys a washing machine with installment payment at the beginning of every month for one year.
Annuity Due
It is the total of the payments and interest earned at the end of the term.
Future Value of an Ordinary Annuity
It is the principal that must be invested today to provide the regular payments for the annuity.
Present Value of an Ordinary Annuity
