Annuity

A series of equal instalment payments occurring at regular intervals. For instance, annual payments are once a year, semi-annual payments are made twice a year and quarterly payments are 4 times a year. In the world of annuities however, this changes slightly as an annuity is income from a capital investment that is paid in a series of regular payments e.g. quarterly, semi-annual or annual payments. An example of annuity is a loan repayment plan that calls for the borrower to repay the loan by making a series of equal payments over some length of time. Examples of such payments include car payments, student loan payments or mortgage payments. A series of constant or equal cash flows that occur at the end of each period for some fixed number of periods is called an ordinary annuity.

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