Paras, Edrick L.

CEE109(7090)
Activity #4

I. Search and define the following terms:

1. Ordinary Annuity
- An annuity in which equal payments are made at the end of each period.

2. Annuity Due
- An annuity in which equal payments are made at the start of each period.

3. Deferred Annuity
- A type of annuity in which the first payment is made several periods after the annuity
begins.

4. Perpetuity
- An annuity in which payments are made indefinitely.

II. Explain briefly the difference between an ordinary annuity, annuity due, deferred
annuity, and perpetuity.

- According to Surbhi (2018), the distinction between the three types of annuities and perpetuity
is that when we say annuity, we mean a constant periodic cash flow over a specific period
that has an end. The difference between the three annuities is that the payment for the
ordinary annuity occurs once a year. Second, the annuity due is made at the start.
Furthermore, a deferred annuity is one in which the first payment is made several periods
after the initial payment. When we say perpetuity, it is similar to an annuity in that there is a
cash flow, but there is no end to it and thus its future value cannot be calculated.

References

[Kimberly Nepa]. (2020, November 19). Ordinary Annuity (Annuity) [Video]. YouTube.
https://www.youtube.com/watch?v=qPyPwMjvAyM&list=PLE4lSSUZ9-
dswCE3py54D8xy5lSGspWg1&index=5

Surbhi, S. (2018, July 26). Difference between annuity and perpetuity (with formula, example and comparison
chart). Key Differences. Retrieved April 5, 2023, from https://keydifferences.com/difference-between-
annuity-
perpetuity.html#:~:text=Ordinary%20Annuity%3A%20The%20payment%20or,fixed%20annuity%20
and%20variable%20annuity.