If you want to know what is annuity in financial mathematics learn with this post and discover what you can do to certify yourself as an expert in this field of finance. Keep reading.
Retiring can be an important issue to consider when making decisions about your future, annuities allow retirees to continue collecting even after they have stopped working. Do you want to know more about it? Take some time to read this short article.
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What is annuity in financial mathematics?
An annuity is a series of income or disbursements of money that are made on a regular basis, whether in annual, monthly, quarterly, semi-annual or any other type of periods. The important thing in this regard is that the time span that separates one income from the other is always the same.
Every annuity must have the following elements:
- rents: Is he amount deposited, withdrawn or paid periodically.
- Rent payment period: It is the time that has been established between one rent and the next.
- Term of the annuity: It is the period that elapses between the first rent and the last.
- Annuity rate: It is the interest rate, either simple interest or compound interest, fixed for the operation, for example, as it happens when a loanin which each installment will accrue accumulated interest.
Types of annuities
The classification of annuities attends to different categories. If we consider the moment in which they must be paid, they can be classified as follows:
- annuity due: Payment is made at the end of the agreed period. For example, at the end of each month.
- annuity due: In annuities anticipated the payment is scheduled at the beginning of the period, for example, at the beginning of the month.
- deferred annuity: Payment is made in a later period, prior agreement between the parties involved. For example, when the expenses made with the credit card of a month can be paid until the fifteenth of the following month.
Benefits of Annuities
Indeed, there are several benefits to be gained from knowing what is annuity in financial mathematics. To begin with, it allows the investor to take into saving your money, without paying taxes on the interest until a later date.
Other benefits of annuities are the creation of a predictable stream of income to fund retirement, adjustments for inflation, estate distribution without probate, death benefits for heirs, principal protection, long-term security, to name a few.
On the web you can find the formulas and several examples with exercises resolved of the different types of annuity, so that you can complete a better knowledge of the subject, however, if your interest is in certifying yourself as a professional, we invite you to enroll in the course that we show you below.
In conclusion, with annuities you can earn money even after you retire, it does not seem that this is a bad retirement plan, however it is important that you know not only what is annuity in financial mathematicsbut also review your financial situation and lifestyle so you can make the right decisions.
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