- Kalpesh Agrawal

# Annuity Immediate and its formula

Let's understand Annuity-immediate...

Consider an annuity with payment of 1 unit (where 1 unit might be 1000 or 10,000 bucks) each, made at the end of every year for

*n*years.This kind of annuity is called an

**annuity-immediate or annuity in arrears.**The Present Value of an annuity is the sum of the present values of all payments.

Let's take an example:

Calculate the present value of an annuity-immediate of amount $1000 paid annually for 10 years at the rate of interest of 10%.

To find the present value of this annuity, let's create the formula...

**v = 1 / (1+****i****)**** **

The present value of the **jth **payment is **v^j.**

You can use this formula to calculate the present value of this annuity.

**The answer is: 6,144.57**

The formula for the future value of annuity immediate is:

Written by: **Kalpesh Agrawal (Jr. Actuarial Officer- IIB) **