Difference between revisions of "Annuity"
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| − | Annuity | + | An ''Annuity'' is financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The [[Present Value|Present Value]] of an annuity is: |
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| + | <math>\text{PV (Annuity)}</math> <math>=</math> <math>\frac{1}{r} - \frac{1}{r(1+r)^t}</math> | ||
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| + | In [[Principles of Corporate Finance|Principles of Corporate Finance]] an annuity is defined as a an investment that produces a level stream of cash flows for a defined number of periods. | ||
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| + | The future value of an annuity of a level of cash streams of \$1 is: | ||
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| + | <math>\text{PV (Future Annuity)}</math> <math>=</math> <math>\frac{(1+r)^t-1}{r}</math> | ||
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| + | Source: http://www.investopedia.com/terms/a/annuity.asp | ||
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[[Category:finance]] | [[Category:finance]] | ||
Latest revision as of 19:23, 27 August 2020
An Annuity is financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The Present Value of an annuity is:
In Principles of Corporate Finance an annuity is defined as a an investment that produces a level stream of cash flows for a defined number of periods.
The future value of an annuity of a level of cash streams of \$1 is:
