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Summary: All annuities involve periodic payments/deposits/contributions and a large lump of money (call it Big Money). Small periodic payments leading to Big Money in
Summary: All annuities involve periodic payments/deposits/contributions and a large lump of money (call it "Big Money"). Small periodic payments leading to Big Money in the future (like saving for a college education) is a future value annuity problem. Future Future Value Payment Value R R R R S Annuity "Big Money in the Future Big Money in the present (like borrowing money to spend now) with subsequent small periodic payments is a present value annuity problem. Present Payment Present Value: P P Value R R - R R Annuity "Big Money in the present Look where the Big Money occurs (now or later) to choose between present and future value annuity formulas.
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