Annuity

A stream of equal cash flows at equal intervals over a fixed time horizon. Defining real-world examples: a fixed-rate mortgage (same monthly payment for 360 months), a pension that pays $40K/year for 20 years, a Social Security check, a bond coupon. Two flavors: ordinary annuity (payments at the END of each period — most loans, bonds, salaries) and annuity due (payments at the START — most rent, subscriptions, insurance premiums). PV-annuity = PMT × [(1 − (1+r)⁻ⁿ) / r]. The bracket is the "annuity factor" — once you know it for a given (r, n), every annuity at that rate and horizon is just PMT × factor. Mortgage math, retirement math, and bond pricing are all annuity math.

Related terms

Adjusted Cost Basis · Capital Gains Distribution · Capitalized Interest · Cost Basis · Dividend Discount Model (DDM) · Dollar-Cost Averaging

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