An //Annuity// is financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The [[Present Value]] of an annuity is:

$\large \text{PV (Annuity)}$ $=$ $\LARGE \frac{1}{r} - \frac{1}{r(1+r)^t}$

In  [[Principles of Corporate Finance]] an annuity is defined as a an investment that produces a level stream of cash flows for a defined number of periods.

The future value of an annuity of a level of cash streams of \$1 is:

$\large \text{PV (Future Annuity)}$ $=$ $\LARGE \frac{(1+r)^t-1}{r}$

Source: http://www.investopedia.com/terms/a/annuity.asp

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finance_public
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Thu, 05 Jan 2012 20:39:40 GMT
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dirkjan
modified
Thu, 05 Jan 2012 20:39:40 GMT
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dirkjan
tags
M12
Principles of Corporate Finance
Term
creator
dirkjan