Question

Select the best examples for the following annuities:

1. Deferred annuities

2. Perpetuities

3. Contingent annuities

4. Ordinary simple annuities

5. Ordinary general annuities

options -

Life Insurance Premiums

Royalty Fees

Retirement Savings Plan Accounts

House Mortgage Payment Plans

Car loan payment plan

Answer 1

Answer :

1)Deferred Annuties - Deferred Annuties means you have contract with insurance company in which you have to invest lumsum amount or pay premium monthly/ quarterly/semianually or annually for fixed duration and after that insurance company promises to pay fixed income regularly till contract date or lumsum at the future date.

Retirement saving plan account is the example of Deferred Annuties.

2) Perpetuities - Perpetuity means an instrument without a maturity date or an income / expense that extends indefinitely. In the business world, this typically refers to a security or bond that doesn’t have a maturity date or a steady stream of reoccurring income that extends into the foreseeable future, like a royalty payment.

Royalty fees is the example of Perpetuities.

3) Contingent Annuties - Contingent Annuties is a n annuity that does not begin making payments to the annuitant or the beneficiary until a certain stated event occurs.

Life Insurance policy is the example of Contingent Annuities. In life insurance policy, if a person is insured till the age of 70 and if death occurs before the age of 70, then his/her nominee will get sum assured in contract.

4) Ordinary Simple Annuties - Simple Annuities Due are annuities where payments are made at the beginning of. each period and the compounding period is equal to the payment period.

House Mortgage Loan Payment is a example of Ordinary Simple Annuities.

4) Ordinary General Annuities - A general annuity is an annuity where the payments do not coincide with the interest periods. You will be able to see that it is very easy to deal with general annuities once an equivalent interest rate is determined with that equivalent rate being compounded as often as the payments are made.

Car Loan payment plan is example of Ordinary General Annuities.