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Annuities Actuarial Notation
In investment, an annuity is a series of payments made at equal intervals.Kellison, Stephen G. (1970). ''The Theory of Interest''. Homewood, Illinois: Richard D. Irwin, Inc. p. 45 Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time. Annuities may be calculated by mathematical functions known as "annuity functions". An annuity which provides for payments for the remainder of a person's lifetime is a life annuity. Types Annuities may be classified in several ways. Timing of payments Payments of an ''annuity-immediate'' are made at the end of payment periods, so that interest accrues between the issue of the annuity and the first payment. Payments of an ''annuity-due'' are made at the beginning of payment periods, ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Investment
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is to generate a return from the invested asset. The return may consist of a gain (profit) or a loss realized from the sale of a property or an investment, unrealized capital appreciation (or depreciation), or investment income such as dividends, interest, or rental income, or a combination of capital gain and income. The return may also include currency gains or losses due to changes in the foreign currency exchange rates. Investors generally expect higher returns from riskier investments. When a low-risk investment is made, the return is also generally low. Similarly, high risk comes with a chance of high losses. Investors, particularly novices, are often advised to diversify their portfolio. Diversification has the statistical effec ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Annual Effective Discount Rate
The annual effective discount rate expresses the amount of interest paid or earned as a ''percentage'' of the balance at the ''end'' of the annual period. It is related to but slightly smaller than the effective rate of interest, which expresses the amount of interest as a ''percentage'' of the balance at the ''start'' of the period. The discount rate is commonly used for U.S. Treasury bills and similar financial instruments. For example, consider a government bond that sells for $95 ('balance' in the bond at the start of period) and pays $100 ('balance' in the bond at the end of period) in a year's time. The discount rate is : \frac = 5.00\% The effective interest rate is calculated using 95 as the base : \frac = 5.26\% which says that 95\% of $105.26 is $100. For every effective interest rate i, there is a corresponding effective discount rate d that can produce the same future value as i if a given amount of principal is invested for the same amount of time at each of t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Time Value Of Money
The time value of money is the widely accepted conjecture that there is greater benefit to receiving a sum of money now rather than an identical sum later. It may be seen as an implication of the later-developed concept of time preference. The time value of money is among the factors considered when weighing the opportunity costs of spending rather than saving or investing money. As such, it is among the reasons why interest is paid or earned: interest, whether it is on a bank deposit or debt, compensates the depositor or lender for the loss of their use of their money. Investors are willing to forgo spending their money now only if they expect a favorable net return on their investment in the future, such that the increased value to be available later is sufficiently high to offset both the preference to spending money now and inflation (if present); see required rate of return. History The Talmud (~500 CE) recognizes the time value of money. In Tractate Makkos page 3a the Ta ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Perpetuity
A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever. There are few actual perpetuities in existence. For example, the United Kingdom (UK) government issued them in the past; these were known as consols and were all finally redeemed in 2015. Real estate and preferred stock are among some types of investments that affect the results of a perpetuity, and prices can be established using techniques for valuing a perpetuity. Perpetuities are but one of the time value of money methods for valuing financial assets. Perpetuities are a form of ordinary annuities. The concept is closely linked to terminal value and terminal growth rate in valuation. Detailed description A perpetuity is an annuity in which the periodic payments begin on a fixed date and continue indefinitely. It is sometimes referred to as a perpetual annuity. Fixed coupon payments on permanently invested (irredeemable) sums of money are prime examples of perpetuities. Scholar ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fixed Rate Mortgage
A fixed-rate mortgage (FRM) is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float". As a result, payment amounts and the duration of the loan are fixed and the person who is responsible for paying back the loan benefits from a consistent, single payment and the ability to plan a budget based on this fixed cost. Other forms of mortgage loans include interest only mortgage, graduated payment mortgage, variable rate mortgage (including adjustable-rate mortgages and tracker mortgages), negative amortization mortgage, and balloon payment mortgage. Unlike many other loan types, FRM interest payments and loan duration is fixed from beginning to end. Fixed-rate mortgages are characterized by amount of loan, interest rate, compounding frequency, and duration. With these values, the monthly repayments can be calculated. Fixed-rate mortgages are vulnerable to inflation risk, whi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Amortization Calculator
An amortization calculator is used to determine the periodic payment amount due on a loan (typically a mortgage), based on the amortization process. The amortization repayment model factors varying amounts of both interest and principal into every installment, though the total amount of each payment is the same. An amortization schedule calculator is often used to adjust the loan amount until the monthly payments will fit comfortably into budget, and can vary the interest rate to see the difference a better rate might make in the kind of home or car one can afford. An amortization calculator can also reveal the exact dollar amount that goes towards interest and the exact dollar amount that goes towards principal out of each individual payment. The amortization schedule is a table delineating these figures across the duration of the loan in chronological order. The formula The calculation used to arrive at the periodic payment amount assumes that the first payment is not due on t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Annuities Under Swiss Law
A Swiss annuity simply refers to a fixed or variable annuity marketed from Switzerland or issued by a Swiss based life insurance company but has no legal definition. Insurance brokers promoting annuity contracts issued by insurance companies domiciled in jurisdictions outside of Switzerland, such as Liechtenstein, also market such contracts as Swiss annuities. The hallmarks of a Swiss annuity generally include the ability to invest in multiple currencies, the custody of assets within Switzerland, and the flexibility of withdrawals. Often touted benefits of a Swiss annuity include the safety of Switzerland plus some degree of asset protection. U.S. Tax Considerations For U.S. taxpayers owning a fixed annuity issued by a non-U.S. insurance company, including a Swiss annuity, the interest credited within the policy is subject to U.S. income tax on an annual basis under the original issue discount rules. Variable annuities issued by non-U.S. insurance companies may permit tax deferr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Annuities Under European Law
Under European Union law, an annuity is a financial contract which provides an income stream in return for an initial payment with specific parameters. It is the opposite of a settlement funding. A Swiss annuity is not considered a European annuity for tax reasons. Immediate annuity An immediate annuity is an annuity for which the time between the contract date and the date of the first payment is not longer than the time interval between payments. A common use for an immediate annuity is to provide a pension to a retired person or persons. It is a financial contract which makes a series of payments with certain characteristics: * either level or fluctuating periodical payments * made annually, or at more frequent intervals * in advance or arrears * duration may be: **fixed (annuity certain) **during the lifetime or one or more persons, possibly reduced after death of one person **during the lifetime but not longer than a maximum number of years **during the lifetime but not s ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Annuities Under American Law
In the United States, an annuity is a financial product which offers tax-deferred growth and which usually offers benefits such as an income for life. Typically these are offered as structured (insurance) products that each state approves and regulates in which case they are designed using a mortality table and mainly guaranteed by a life insurer. There are many different varieties of annuities sold by carriers. In a typical scenario, an investor (usually the annuitant) will make a single cash premium to own an annuity. After the policy is issued the owner may elect to annuitize the contract (start receiving payments) for a chosen period of time (e.g., 5, 10, 20 years, a lifetime). This process is called annuitization and can also provide a predictable, guaranteed stream of future income during retirement until the death of the annuitant (or joint annuitants). Alternatively, an investor can defer annuitizing their contract to get larger payments later, hedge long-term care cost ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fixed Rate Mortgage
A fixed-rate mortgage (FRM) is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float". As a result, payment amounts and the duration of the loan are fixed and the person who is responsible for paying back the loan benefits from a consistent, single payment and the ability to plan a budget based on this fixed cost. Other forms of mortgage loans include interest only mortgage, graduated payment mortgage, variable rate mortgage (including adjustable-rate mortgages and tracker mortgages), negative amortization mortgage, and balloon payment mortgage. Unlike many other loan types, FRM interest payments and loan duration is fixed from beginning to end. Fixed-rate mortgages are characterized by amount of loan, interest rate, compounding frequency, and duration. With these values, the monthly repayments can be calculated. Fixed-rate mortgages are vulnerable to inflation risk, whi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Probability
Probability is the branch of mathematics concerning numerical descriptions of how likely an Event (probability theory), event is to occur, or how likely it is that a proposition is true. The probability of an event is a number between 0 and 1, where, roughly speaking, 0 indicates impossibility of the event and 1 indicates certainty."Kendall's Advanced Theory of Statistics, Volume 1: Distribution Theory", Alan Stuart and Keith Ord, 6th Ed, (2009), .William Feller, ''An Introduction to Probability Theory and Its Applications'', (Vol 1), 3rd Ed, (1968), Wiley, . The higher the probability of an event, the more likely it is that the event will occur. A simple example is the tossing of a fair (unbiased) coin. Since the coin is fair, the two outcomes ("heads" and "tails") are both equally probable; the probability of "heads" equals the probability of "tails"; and since no other outcomes are possible, the probability of either "heads" or "tails" is 1/2 (which could also be written ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Life Table
In actuarial science and demography, a life table (also called a mortality table or actuarial table) is a table which shows, for each age, what the probability is that a person of that age will die before their next birthday ("probability of death"). In other words, it represents the survivorship of people from a certain population. They can also be explained as a long-term mathematical way to measure a population's longevity. Tables have been created by demographers including Graunt, Reed and Merrell, Keyfitz, and Greville. There are two types of life tables used in actuarial science. The period life table represents mortality rates during a specific time period of a certain population. A cohort life table, often referred to as a generation life table, is used to represent the overall mortality rates of a certain population's entire lifetime. They must have had to be born during the same specific time interval. A cohort life table is more frequently used because it is able to ma ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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