This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Chapter 5.2: Annuities • In the previous section, we considered a deposit of money, left to earn interest over time. • Today, we will look at annuities . An annuity is a sequence of deposits or payments made at regular intervals. For example, the mortgage on a house is an annuity, as is a savings plan to which we make regular deposits. • We can classify annuities according to the term . Annuities may have a predetermined term length ( annuity certain ), have no fixed end-date, ( perpetuity ), or may have no predetermined start-date ( contingent an- nuity ). • Payments may be made at the end of the payment period ( ordinary annuity ), or at the beginning of the payment period ( annuity due ). • The conversion periods may coincide with the payment periods ( simple annuity ), or may not ( complex annuity) . • We will focus on annuities in which: – the term-length is predetermined, – the payments are made at the end of the payment period, – conversion periods and payment periods coincide, and – payments are equal in size. • As with compound interest, we may be interested in the future value, or the present value of an annuity....
View Full Document
This note was uploaded on 02/05/2011 for the course MATH 377 taught by Professor Stephenlang during the Spring '11 term at University of Victoria.
- Spring '11