Types of Simple Annuities
In engineering economy, annuities are classified into four categories. These are: (1) ordinary annuity, (2) annuity due, (3) deferred annuity, and (4) perpetuity. These four are actually simple annuities described in the previous page.
Annuity
An annuity is a series of equal payments made at equal intervals of time. Financial activities like installment payments, monthly rentals, life-insurance premium, monthly retirement benefits, are familiar examples of annuity.
Annuity can be certain or uncertain. In annuity certain, the specific amount of payments are set to begin and end at a specific length of time. A good example of annuity certain is the monthly payments of a car loan where the amount and number of payments are known. In annuity uncertain, the annuitant may be paid according to certain event. Example of annuity uncertain is life and accident insurance. In this example, the start of payment is not known and the amount of payment is dependent to which event.
