• Kalpesh Agrawal

Annuity Immediate and its formula

Let's understand Annuity-immediate...

  • Consider an annuity with payment of 1 unit (where 1 unit might be 1000 or 10,000 bucks) each, made at the end of every year for n years.

  • This kind of annuity is called an annuity-immediate or annuity in arrears.

  • The Present Value of an annuity is the sum of the present values of all payments.

Let's take an example:

Calculate the present value of an annuity-immediate of amount $1000 paid annually for 10 years at the rate of interest of 10%.

To find the present value of this annuity, let's create the formula...

v = 1 / (1+i)

The present value of the jth payment is v^j.

You can use this formula to calculate the present value of this annuity.

The answer is: 6,144.57

  • The formula for the future value of annuity immediate is:

Written by: Kalpesh Agrawal (Jr. Actuarial Officer- IIB)


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