Annuities are not easy however if u see a question asking for a contribution or referring to paying money each month that is an annuity. u can work out the present value of an annuity and the future value of an annuity by first of all working out the situation. so if someone says how much do i get after investing $5000 for 21 years? u use future value of an annuity. (formulas are provided). Present value of an annuity refers to finding out the current value. i.e. what sum of money invested for 10 years now (interest at 0.625% per month compounded monthly) would be equivalent to an annuity of $525 invested at the end of each month at the same rate of interest? to work out the solution u use N=M(1+r)^n-1/r(1+r)^n - present value of an annuity. Any clearer?
