What Are Annuity Rates And Why Are They Important 60



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Exclusive This external link was removed for your protection is each type regarding investment or payout where either an investor fork out money at place intervals or receives funds at set intervals. For example, an backer deposits $1, website web site web site from a deposit accounts some time each and every year, also he wants to understand how a lot money he will have in 2 website years whenever factoring in curiosity. The annuity factor is the number the investor must multiply his deposit amount by to determine the future worth of the annuity.

Difficulty: Easy

1 Find the interest rate per compounding period and the number of times the annuity elements. For example, an annuity compounds at 5 percent interest per year for 4 long time.

2 Add 1 to the number regarding times the annuity compounds. In the example, 1 and 4 years equals 5.

3 Add 1 to the interest rate per compounding amount. From our example, 1 plus 5 percent equals 1. website5.

4 Raise the number worked out in Step 3 to the power of the quantity calculated from Step 2. In our example, 1. website5 raised to the power of 5 equals 1.276281563.

5 Subtract 1 from the amount calculated within Action 4. In our example, 1.276281563 minus 1 equals internet site.276281563.

6 Separate the number calculated in Step 5 by the interest rate each compounding point to determine the annuity component. From our instance, 1.276281563 separated by internet site. website5 equals 25.52563126. This is the annuity factor.

References

1728: Annuity Formula Investopedia: Annuity Definition

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