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    An annuity is a series of equal periodic cash flows over a specified period of time, such as annual or monthly payments. There are two main types of annuities: ordinary annuities where payments are made at the end of each period, and annuity due where payments are made at the beginning of each period. Loan amortization determines the equal periodic loan payments needed to repay the principal and provide the lender with interest over a specified period, as shown in a loan amortization schedule. For example, to repay a $6,000 loan at 10% interest over 4 years with annual end-of-year payments, equal payments of $1,892.82 would be required.

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    An annuity is a series of equal periodic cash flows over a specified period of time, such as annual or monthly payments. There are two main types of annuities: ordinary annuities where payments are made at the end of each period, and annuity due where payments are made at the beginning of each period. Loan amortization determines the equal periodic loan payments needed to repay the principal and provide the lender with interest over a specified period, as shown in a loan amortization schedule. For example, to repay a $6,000 loan at 10% interest over 4 years with annual end-of-year payments, equal payments of $1,892.82 would be required.

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    © All Rights Reserved
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    7 views20 pages

    Annuities

    Uploaded by

    farah
    An annuity is a series of equal periodic cash flows over a specified period of time, such as annual or monthly payments. There are two main types of annuities: ordinary annuities where payments are made at the end of each period, and annuity due where payments are made at the beginning of each period. Loan amortization determines the equal periodic loan payments needed to repay the principal and provide the lender with interest over a specified period, as shown in a loan amortization schedule. For example, to repay a $6,000 loan at 10% interest over 4 years with annual end-of-year payments, equal payments of $1,892.82 would be required.

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    © All Rights Reserved
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    Annuities

    D/Ahmed EL Otiefy
    Annuities
    An annuity is a stream of equal periodic cash flows, over a
    specified time period. These cash flows are usually annual
    but can occur at other intervals, such as monthly rent or
    car payments
    Ordinary annuity :An annuity for which the cash
    flow occurs at the end of each period
    .
    Annuity due An annuity for which the cash
    flow occurs at the beginning of each period
    FINDING THE FUTURE VALUE OF AN ORDINARY ANNUITY
    FINDING THE FUTURE VALUE OF AN ANNUITY DUE
    FINDING THE FUTURE VALUE OF AN ANNUITY DUE
    FINDING THE PRESENT VALUE OF AN ORDINARY ANNUITY
    FINDING THE PRESENT VALUE OF AN ANNUITY DUE
    LOAN AMORTIZATION

    loan amortization
    The determination of the equal loan amortization schedule
    periodic loan payments A schedule of equal payments
    necessary to provide a lender to repay a loan. It shows the
    with a specified interest return allocation of each loan
    and to repay the loan principal payment to interest and
    over a specified period. principal.
    You borrow $6,000 at 10 percent and agree to make
    equal annual end-of-year payments over 4 years. To
    find the size of the payments the lender determines
    the amount of a 4-year annuity discounted at 10
    percent that has a present value of $6,000. This
    process is actually the inverse of finding the present
    value of an annuity

    ,
    Calculator Use Using the calculator inputs shown at the
    left, you will find the
    annual payment amount to be $1,892.82. Thus, to repay
    the interest and principal
    on a $6,000, 10%, 4-year loan, equal annual end-of-year
    payments of
    $1,892.82 are necessary

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