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define and provide real-life example of the following concepts: Ordinary Annuity Perpetuity Annuity Due Annual Percentage...

define and provide real-life example of the following concepts:

  1. Ordinary Annuity
  2. Perpetuity
  3. Annuity Due
  4. Annual Percentage Rate
  5. Effective Annual Rate
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Answer #1

Ordinary annuity are equal end of the period payments in to an investment account over a finite period of time . Examples
Coupons of Bond Payments

Perpetuity are securities or bonds that pay equal payments till infinity.Examples: The UK government issued bonds called Consols are perpetuity

Annuity Due are equal beginning of the period payments in to an investment account over a finite period of time .Rent Payment or lease agreements can be examples of annuity due.

Annual Percentage Rate is the annual cost of borrowing without effects of number of compounding;Examples of APR : Banks state their loan rate or savings rate at APR

EAR takes into account the interest rate due to number of compounding.E.g Investors in securities use EAR rather than APR to evaluate attractiveness of a security.

Please Discuss in case of Doubt

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