# What Is An Annuity Due?

What is the value of an Annuity? An annuity is a financial investment that pays out regular, stream-of-funds income over time. The value of any annuity depends on its terms of payment and the interest rate over the years. The present value of an annuity is simply the amount of money currently owed from an annuity to the company.

The value of any annuity depends on two things: the rate of interest and the discount at which the interest is calculated. The present value of any annuity cannot be calculated using only the interest rate, since the rate may have changed since the initial purchase of the annuity. The present value can be calculated by following an equation that takes the present values of all factors involved: present value – discount rate | value | rate | annuities | present} How is the Present Value calculated? The value of any annuity basically is equal to the amount of money that would be paid out under the terms of the agreement. This amount will vary over time depending on how the annuitant plans to use the lump sum he receives. In general, annuitants use their lump sum to pay all of their expenses and bills and then use the rest of the money to fund investments, provide tax shelter, and build capital. A small portion of the annuity may be used to supplement the income of the person who initially purchased the annuity; most of it stays with the company that originally issued it.

What is the rate of return on an annuity? The rate of return is simply the amount of money that would be left over if the entire sum was invested. Any discount that is applied to the remaining funds reduces the value of the remaining value. When applying the discount rate to the present value, it uses the same equation that is used to determine the discount that is applied to raw materials or labor costs. Using current discount rates and current investments yields a very precise calculation of what the annuitant’s future guaranteed income will look like.

Is there another way to calculate the present values of annuities? If a person has an insurance policy that pays out a fixed interest rate for a certain period of time, that person can plug this information into the present value formula to calculate the amount of interest that will be earned. Any lump sum that is received should also be treated as if it were cash flow, since that money would go directly into the insurance company’s account. Interest rates are changing all the time, and the amount of change is equal to the amount of change in the index that the cash flow represents.

What is an ordinary annuity? An ordinary annuity is one that is purchased from a company instead of being made by an individual. The insurance company will make a lump sum payment and distribute the balance over time. However, some companies choose to make payments at different intervals. Even if a person receives one lump sum payment for an annuity due, that person might still be able to receive regular payments that are higher than the amount of their initial annuity due.