Annuity Definition

Definition: It refers to a series of equal payments that are usually made at regular intervals for a set amount of years or for the person’s lifetime

Annuity equation:

FV = (A/i)[(1+i)n – 1], where:


FV = Future value (It’s the amount wanted in the future)

A = Annuity; annuities are the initial and subsequent payments (which must be the same amount).

i = Interest rate (The interest rate in the formula must be written in decimal form, such as 0.03 instead of 3%)

n = This is the number of periods, where “n” is the number of equal deposits that will be made.