Annuities are payments or deposits that are made at regular time intervals.
Annuity is a concept that refers to the annual condition : that it extends for one year or that it is reiterated each year . The notion is also used to name the annual amount that generates or represents a certain monetary burden.
The annuity, in this framework, can be a series of deposits or payments that take place in time intervals that occur regularly . Beyond what is specified by the concept itself, any sequence of payments in regular periods is known as an annuity, even when they are not annual.
The etymology
With marked Latin roots is the term we are analyzing. Specifically, we can establish that its etymological origin is the result of the sum of three components of said language:
- The noun annus , which can be translated as “season” or “year” .
- The suffix -alis , which is used to indicate “relative to” .
- The suffix -dad , which is the one that has been used to establish a “quality” .
Types of annuity
Based on all of the above, we find a varied series of annuity types such as the following:
- Ordinary annuity . It is also known as annuity due and refers to the fact that the payment that corresponds to a certain time is made at the end of it. So, for example, it can take place at the end of the month.
- Advance annuity . Under this concept is that annuity that is called that when the corresponding payment is made at the beginning of the interval or period of time in question. In this way, it can be done at the beginning of the month, to indicate a possibility.
In addition to everything indicated, we can state that there are many other types of annuities. To classify them, different criteria can be used, such as the nature of the effective payment commitment, the tax status, the condition of the investment, the agreement to pay the premium or even the main purpose.
Rents, pensions and salaries can be considered annuities.
Other considerations
Amortizations and impositions are annuities. Salaries , mortgage payments , retirements , pensions , rents , and insurance premiums may also receive this name.
The most common use of the term, however, is associated with the periodic economic movement that carries compound interest. In this context, the annuity is made up of the term (the extension), the payment period (how much time separates one payment from the other), the income (the deposit or periodic payment) and the annual income (the sum of the payments over the period). over a year).
In the Roman Empire , annuity governed the exercise of the different ordinary magistracies, with the exception of the dictator. Through the annuity it was established that the praetor , the consul , the aedile and other officials fulfilled their functions for one year. In this way, the Romans elected these magistrates every year, renewing the positions. Only in extraordinary situations could the mandate of the praetors and consuls be extended.