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Annuity is the term used to describe a series of periodic flows of equal amounts. These flows either can be receipts or payments. Annuities are defined as a series of equal payments that occur at equal intervals for a specified period of time. Annuity problemsare more difficult to visualize and can often be more easily understood through the use of time lines. Time lines are one way to graphically present the timing and amount of cash flows that relate to a specific problem.
Annuity payments occur once per period (e.g. once a year or once a month). Annuities can have different characteristics based on when the payment occurs during the period. If the payment occurs at the end of the period, then the annuity is called an ordinary annuity. Annuities whose payments occur at the beginning of the period are called annuities due. Since payments occur sooner with an annuity due, they are more attractive to the recipient of the payment and less attractive to the payer.