Business Mathematics
Mathematics 244
Course
Outline
Unit 9
Annuities
An “annuity” is a series of equal payments made at regular intervals. The term is applied to any fund to which regular payments are made.
Annuities are classified on the basis of term, dates of payment, or length of payment interval. The classification includes ordinary annuities, annuities due, deferred annuities, and simple perpetuities.
The textbook discusses many applications of annuities to investment situations that you face regularly. You will find you will become a much more informed investor having learned this material.
Objectives
After completing this unit, you should be able to perform the following tasks.
- Define the term “ordinary annuity,” and calculate the amount of an ordinary simple annuity.
- Calculate the present value of an annuity.
- Determine the size of the periodic payment, given either the interest, term, and present value of the annuity, or its interest, term, and amount.
- Calculate the term of an annuity, given its amount, periodic payment, and interest rate, or its present value, periodic payment, and interest rate.
- Find the interest rate, given the amount of the annuity, the periodic payment, and the term, or given the present value of the annuity, the periodic payment, and the term.
- Define the term “annuity due,” and calculate any of the components of an annuity due.
- Define the term “deferred annuity,” and calculate any of the components of a deferred annuity.
- Define the term “simple perpetuity,” and calculate the present value of an ordinary perpetuity or perpetuity due.
