ABSTRACT
To find the present worth of an annuity, we can, of course, find the present worth of each payment and add them together; but it will evidently save a great deal of labor if we can derive the present worth immediately, as we have learned to do with the amount. The like course of reasoning will give us the result. To find the present worth of an annuity of $1.00 for a given time and rate, the compound discount for that time and rate is divided by a single interest. It may assist in acquiring a clear idea of the working of an annuity, if we analyse a series of annuity payments from the point of view of the purchaser. He who invests $3.7171 at 3%, in an annuity of 4 periods, expects to receive at each payment, besides 3% on his principal to date, a portion of that principal, and thus to have his entire principal gradually repaid.
