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    pulasta mahapatra
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    An annuity is a series of equal payments made at regular intervals such as monthly mortgage payments, insurance premiums, or pension payments. To calculate the cost of a retirement annuity that will pay $2,500 per month for 20 years with a discount rate of 4%, one discounts the future monthly payments back to the present using the discount rate to determine the total cost.

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    1ca241d9106f9916c679f6348432f547 Examples and Applications Annuities

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    An annuity is a series of equal payments made at regular intervals such as monthly mortgage payments, insurance premiums, or pension payments. To calculate the cost of a retirement annuity that will pay $2,500 per month for 20 years with a discount rate of 4%, one discounts the future monthly payments back to the present using the discount rate to determine the total cost.

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    © All Rights Reserved
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    17 views3 pages

    Examples and Applications Annuities

    Uploaded by

    pulasta mahapatra
    An annuity is a series of equal payments made at regular intervals such as monthly mortgage payments, insurance premiums, or pension payments. To calculate the cost of a retirement annuity that will pay $2,500 per month for 20 years with a discount rate of 4%, one discounts the future monthly payments back to the present using the discount rate to determine the total cost.

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    © All Rights Reserved
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    BASIC PRINCIPLES OF

    FINANCIAL VALUATION
    DISCOUNTING
    Examples and Applications:
    Annuities
    James P. Weston
    Professor of Finance
    The Jones School, Rice University
    ANNUITIES

    Series of equal payments at regular intervals.


    „ Regular deposits to savings account
    „ Monthly mortgage payments
    „ Insurance premiums
    „ Pension payments
    RETIREMENT ANNUITY EXAMPLE

    Problem: You want to retire and maintain


    a monthly income of $2,500 for the next
    20 years. How much would it cost to
    purchase this annuity if discount rates
    are currently 4%?

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