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Compound Sum of an Annuity

An annual is a stream of equal annual cash-flows. Annuities involve calculations based upon the regular periodic contribution or receipt of a fixed sum of money. The calculations required to find the sum of an annuity on which interest is paid at a specified rate compounded annually are illustrated in Example 2.5.


Mr X deposits Rs 2,000 at the end of every year for 5 years in his saving account paying 5 percent interest compounded annually. He wants to determine how much sum of money he will have at the end of the 5th year.

Solution.  Table 2.6 presents the relevant calculations.

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