What Is an Ordinary Annuity?

Ordinary annuities, also known as "post-paid annuities," refer to annuities with equal amounts of receipts and payments at the end of each period. This form of annuity is the most common in real economic life. The final value of an ordinary annuity is like the sum of the principal and interest of zero deposits and rounds. It is the sum of the final value of the compound interest of the same amount of payments at the end of each period within a certain period.

Ordinary annuity

Annuity: If the income of each period of a series of cash flows is equal, such as monthly income

Ordinary Annuity refers to an annuity with equal receipts and payments at the end of each period.

The formula for calculating the final value of ordinary annuities is:

= Set:

Aannuity amount; iinterest rate; nnumber of interest accrual periods; F V A n annuity final value. The above formula is called the annuity final value coefficient or annuity compounding coefficient. Can be written as F V I F A i , n or A C F i , n , then the formula for calculating the final value of the annuity can be written as:

F V A n = A * F V I F A i , n = A * A C F i , n

Example: Deposit 100 yuan into the bank at the end of each year for 5 years, and the interest rate on the deposit is 8%.

(yuan)

The sum of the present value of the series of receipts and payments at the end of each period within a certain period is called the present value of ordinary annuities. The symbol of the present value of the annuity is PVAn, and the formula for calculating the present value of the ordinary annuity is:

In the formula, it is called annuity present value coefficient, or annuity discount coefficient. The annuity present value coefficient can be abbreviated as P V I F A i , n or A D F i , n .

P V A n = A * P V I F A i , n = A * A D F i , n

Example: Deposit a sum of money now and plan to get 100 yuan at the end of each year for the next 5 years. If the interest rate is 10%, how much should you deposit now?

(Yuan) ^[1]