Annuity loan
An annuity bond is a special form of a bond in which the interest and face value are not repaid individually, e.g. B. with the standard bond , but the same amount, the annuity , is paid regularly . These annuities then cover the coupon and repayment.
In the US, annuity bonds are a popular way to finance pensions because they promise regular payments.
An annuity bond is valued as follows:
in which
- A = annuity
- r = (term-independent) interest rate
- n = remaining term