Concept of Annuities and formulae

1. Mrs.Mahitha Davala
M.Com., M.B.A

2.  Annuity: An annuity is a fixed sum paid at regular intervals
under certain conditions. The interval may be either a year or
a half-year or, a quarter year or a month.
 Amount of an annuity :Amount of an annuity is the total of
all the instalments left unpaid together with the compound
interest of each payment for the period it remains unpaid.
 The person obliged to make such payments is called
annuitator, the person entitled to receive such payments is
called annuitant or annuity holder, the lumpsump
consideration against which such payments are granted is
called presesnt value and the lumpsump amount which is
recoverable after a certain period agaist such regular
payments is called the accumulated amount.

3.  Repayment of loan
 Commutation of Pension
 Establishment of a sinking fund
 Establishment of an Endowment fund
 Securing a regular income
 Recurring deposits
 Annuity policy

4. ON THE BASIS OF
CONTINUITY
ON THE BASIS OF
PAYMENT
 Annuity Certain
 Annuity Contingent
 Annuity Perpetual
 Ordinary Annuity or
Annuity certain due
immediate
 Annuity due prepaid
immediate
 Annuity deffered

5.  Annuity is the periodic instalments of some amount
 Time interval is fixed between two consecutive
instalments
 Instalments are due either in the beginning or at the
end of the period.
 Interest is compounded at the end of each period.

6.  To find the future amount or the Accumulated
amount(when Annuity is paid at the end of the year
or Annuity is certain due immediate)
Where M=Accumulated amount
A=Annuity to be paid periodically
i= interest rate
N= number of periods.

7.  To find the accumulated amount when the Annuity
is due prepaid immediate or Annuity is paid at the
beginning of the year

8.  To find the present value of an Annuity when
Annuity is paid at the end of the year or Annuity is
certain due immediate:
or
Where V= Present Value of annuity

9. Thank You