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Hello sir,
I hope this message finds you well. I am a bit confused with the annuity topic. Could you please check if the understanding I have gathered is correct?
Annuity is when we receive an equal amount of money from a non-current asset, like $1,000 each year for a series of time, like 8 years.
Annuity calculates the total amount we earn for the entire period, which in this case is 8 years, which is $8,000. This $8,000 is equal to the equivalent of how much money now or what is the present value of this $8,000
Am I correct, sir?
Your second paragraph is correct.
However, to calculate the present value we multiply the 1,000 by the 8 year annuity factor (in order to account for the interest). Do watch my free lectures on this. (The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well 🙂 )
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