In finance math, what is an annuity?
AnswerA series of equal payments at regular intervals
An annuity is any stream of equal payments made at regular intervals.
Money · Facts & stats
Annuity facts & stats
7 fact-checked facts about annuities, each with the reason behind it. 5 more are in today's round and join this page after it closes.
The basics
The word 'annuity' comes from the Latin 'annus', meaning what?
AnswerYear
Annus means year, since early annuities paid out once a year.
Going deeper
Equal monthly payments on a fixed-rate mortgage are an example of what?
AnswerAn annuity
Fixed equal payments at regular intervals make a mortgage repayment stream an annuity.
What do actuaries rely on to price annuities that pay for life?
AnswerMortality (life expectancy) tables
Life annuity prices depend on how long people are expected to live, taken from mortality tables.
A perpetuity paying $100 per year at a 5% interest rate has what present value?
Answer$2,000
The present value of a perpetuity is payment ÷ rate: $100 ÷ 0.05 = $2,000.
Expert level
What is a deferred annuity?
AnswerOne whose payments begin at a later date
In a deferred annuity, payments start after a waiting (accumulation) period.
What does the future value of an annuity measure?
AnswerThe total of all payments plus interest at the end
Future value adds up every payment and the interest each earns up to the final date.
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