An ordinary annuity is a fixed amount of income that is given annually or at regular intervals. An annuity is an agreement with an insurance firm during which you create a payment (one-time big payment) or series of payments and, in return, receive a regular fixed income, beginning either immediately or after some predefined time within the future. The ordinary annuity formula is used to find the present and future value of an amount. Let us understand the ordinary annuity formula using solved examples.
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Finding the future value of the annuity is important to accommodate inflation with time. The ordinary annuity formula is explained below along with solved examples. Annuity formulas for future and present value is also given.