Annuity Table
An annuity table is a tool for determining the present value of an annuity or other structured series of payments. Such a tool, used by accountants, actuaries, and other insurance personnel, takes into account how much money has been placed into an annuity and how long it has been there to determine how much money would be due to an annuity buyer or annuitant.
Figuring the present value of any future amount of an annuity may also be performed using a financial calculator or software built for such a purpose.
Annuity Table
An annuity table is a tool used to determine the present value of an annuity or other structured payments. It takes into account the amount of money invested in the annuity and the time it has been invested to help accountants, actuaries, and other insurance professionals calculate the amount owed to the annuity buyer or beneficiary.
Origin
The concept of the annuity table dates back to ancient Rome, where similar tools were used to calculate the present value of periodic payments. With the development of financial markets, annuity tables have evolved into modern financial tools widely used in insurance and pension plans.
Categories and Characteristics
Annuity tables are mainly divided into two categories: ordinary annuity tables and annuity due tables. Ordinary annuity tables are used to calculate the present value of annuities that begin payments at a specific future time, while annuity due tables are used to calculate the present value of annuities that begin payments immediately. The key characteristic of ordinary annuity tables is that they consider the delay in payments, whereas annuity due tables do not.
Specific Cases
Case 1: Suppose a person purchases an annuity that pays $1000 annually for 10 years with an annual interest rate of 5%. Using an ordinary annuity table, the present value of this annuity can be calculated as $7721.73.
Case 2: A company offers a pension plan to its employees, where retirees receive $2000 monthly for 20 years with an annual interest rate of 4%. Using an annuity due table, the present value of this pension plan can be calculated as $299,503.50.
Common Questions
1. How to choose the appropriate annuity table? The choice of annuity table should be based on whether the payments begin immediately or at a future date, determining whether to use an ordinary annuity table or an annuity due table.
2. Are the results from annuity tables accurate? The results from annuity tables are based on assumed interest rates and time periods, and actual results may vary due to market changes.
