An annuity is defined as stream of uniform period cash flows. The payment of life insurance premium by the policyholder to the insurance company is an example of an annuity. Similarly, deposits in a recurring bank account are also an annuity.
Depending on the timing of the cash flows annuities are classified as:
a) Regular Annuity or Deferred Annuity
b) Annuity Due.
The regular annuity or the deferred annuities are those annuities in which the cash
flow occur at the end of each period. In case of an annuity due the cash flow occurs at
the beginning of the period.
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