what is annuity certain and annuity perpetualty ? Give example
Answers
Answer:
Perpetuity. Perpetuity is similar to annuity. ... For annuity, payments last for a certain period, whereas for perpetuity, they continue indefinitely, as represented by (∞). The equation below is used to calculate present value of perpetuity. It requires only the first payment and interest rate.
Answer:
An annuity certain is an investment that provides a series of payments for a set period of time to a person or to the person's beneficiary or estate. Because it has a set expiration date, an annuity certain generally pays a higher rate of return than a lifetime annuity. Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments.
A perpetuity is an annuity in which the periodic payments begin on a fixed date and continue indefinitely. It is sometimes referred to as a perpetual annuity. A classic example would be that of a perpetual bond, which promises to pay interest each year, for eternity (or for as long as the borrower can afford to pay).
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