ABSTRACT
This chapter shows how to deal with a sequence of recurring, equal payments when there is interest involved. It explains how the future value of an annuity works. The chapter explains how to calculate the balance of a savings account after a few yearly deposits of an equal amount against a certain interest rate. It examines the payments of an annuity. Annuities can be paid for a specific period of time such as 30 years or during the annuity owner’s lifetime. The chapter also shows how to calculate the value of an annuity, and how to calculate the payments per year if the present value of an annuity is known. It describes how to determine the present value of an annuity if the yearly payments, the duration, and interest are known. An amortization is a financial product whereby the amount of money borrowed from a bank is to be paid back in equal yearly payments.
