An Application of Geometric Progression Annuity An Application of Geometric Progression

What Is Annuity? An annuity is a series of equal payments made at the ends of equal intervals of regular time periods for a fixed duration. The time periods could be weekly, monthly, quarterly, yearly or at any other time interval.

What are the types of annuities? Two types: Fixed annuity – The return interest is fixed and the payouts do not change regardless of other changes. Variable annuity – The return interest is variable to the performance of the investment.

Annuity payment Annuity Due Ordinary Annuity Also known as ‘annuity in advance’; the annuity payment is provided at the start of the time period i.e. at the start of every month, 3 months, etc. Eg. Insurance premiums This is annuity payment provided at the end of the time period. The payments are usually done every week, month or quarterly. Eg. Mortgage

Annuity Due v/s Ordinary Annuity The advance payment of the annuity due provides faster access to cash when the investor retires. It allows the retiree to immediately begin gaining interest on his investment. Payment at the end of the term provides an increased amount in comparison to advanced payment. It is a guaranteed return since what you invest multiplies by the interest rate.

Annuity Due v/s Ordinary Annuity Requires a high interest rate The principle is not generally high Principle value can do down with change in market share value or a significant currency drop

What is Superannuation? This is an investment made to be used when a person retires. Your employer deducts a certain amount from your salary and invests it in a larger account which stays active all through your work years. The return on this investment is made available when the person retires.