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What is an Annuity?

An annuity is a regular, equal periodic sum of money.

The payment can be paid at the end or at the beginning of the period.

This tutorial covers those annuities coming at the end of a period.

 

This diagram shows a monthly annuity of $200 for 260 months.

 

Annuities can be accumulated into the future (future value/ compound value) or future amounts can be valued in todays dollars (present value).

Calculating an Annuity

The former to calculate an annuity is quite complicated.

Learn more on this page.

Where payment is at the beginning of the period, the payment is called an ‘annuity due’.

A different formula is used for this type of payment.

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