Annuity (investment calculation)
In economics or financial mathematics , an annuity ( lat. Annus = year) is a regular annual payment that is made up of the elements interest and repayment. A distinction is made between the constant and the variable annuity. During the term of an annuity loan, the ratio of the interest portion to the repayment portion of the annuity, which is constant here, changes with the progressive repayment of the loan value date , which is why annuity loans are also referred to as "initial repayment". In the case of an annuity loan, the (increasing) repayment and the (decreasing) interest payment are calculated so that the regular total charge remains the same, i.e. H. is annuity. In the case of an installment loan , on the other hand, the repayment amount remains unchanged with each payment, so that the variable annuity in this case decreases due to the lower interest burden.
In the capital budgeting is the annuity of net present value of an investment spread over the project duration. This takes account of the fact that a capital value generated within a shorter period is to be valued higher in comparison, since this investment can possibly be repeated ( investment chain ).