Lesson 13. 1 : Simple Annuity Flashcards
An ____ is a sum of money that is
paid in regular equal payments.
Annuity
The period of time between consecutive payments is called _____.
Payment interval
The ____ of an annuity is the time from the beginning of the first payment interval to the
end of the last payment interval; monthly, quarterly, semiannually, or annually.
Term
Types of Annuity:
• payable for a definite duration. It means that this annuity begins
and ends on a definite date.
Annuity Certain
Types of Annuity:
• payable over a term that has a definite start date but no definite end
date.
example: housing rent.
Perpetuity
Types of Annuity:
• payable for an indefinite duration.
• beginning or the termination is dependent on some certain event.
Example: monthly payment of car loan and insurance.
Contingent Annuity
Kind of Annuity:
• an annuity certain whose compounding period is the same as the payment interval.
Simple Annuity
Kinds of Annuity:
• annuity certain whose compounding period is not the same as the payment interval.
General Annuity
Classifications of Simple Annuity:
an annuity certain whose compounding period is the same as the payment interval.
Simple Annuity
Classifications of Simple Annuity:
• annuity I’m which the period payment is made at the beginning of each payment interval.
Annuity Due
What is the formula for future value of an ordinary annuity?
(1 + i)ṅ-1|
FV = R | ————-|
| i |
What is the formula for the present value of an ordinary annuity?
|1- (1 + i)‐ṅ|
PV = R | ————- |
| i |
What is the formula for the future value of an annuity due?
(1 + i)ṅ+1 |
FVad = R | ————- -1|
| i |
What is the formula for the present value of an annuity due?
|1- (1 + i)1-ṅ. |
PVad= R | ————- +1|
| i |
