Annuity loan

Back of the annuity bond of AG Grand Hotel National from April 1, 1904 with amortization plan

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:

${\displaystyle P_{0}={\frac {A}{r}}-{\frac {\frac {A}{r}}{(1+r)^{n}}}}$

in which

A = annuity

r = (term-independent) interest rate

n = remaining term