Financial Terms Annuity Period

# Definition of Annuity Period

## Annuity Period

The time between each payment under an annuity.

# Related Terms:

the present value of a finite stream of cash flows for every beginning \$1 of cash flow.

## PPF (periodic perpetuity factor)

a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.

## Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

## Annuity

A regular periodic payment made by an insurance company to a policyholder for a specified period
of time.

## Annuity due

An annuity with n payments, wherein the first payment is made at time t = 0 and the last
payment is made at time t = n - 1.

## Annuity factor

Present value of \$1 paid for each of t periods.

## Annuity in arrears

An annuity with a first payment on full period hence, rather than immediately.

## Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

## Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.

## Credit period

The length of time for which the customer is granted credit.

## Deferred nominal life annuity

A monthly fixed-dollar payment beginning at retirement age. It is nominal
because the payment is fixed in dollar amount at any particular time, up to and including retirement.

## Discount period

The period during which a customer can deduct the discount from the net amount of the bill
when making payment.

## Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

## Equivalent annual annuity

The equivalent amount per year for some number of years that has a present
value equal to a given amount.

## Evaluation period

The time interval over which a money manager's performance is evaluated.

## Holding period

Length of time that an individual holds a security.

## Holding period return

The rate of return over a given period.

## Multiperiod immunization

A portfolio strategy in which a portfolio is created that will be capable of
satisfying more than one predetermined future liability regardless if interest rates change.

## Net period

The period of time between the end of the discount period and the date payment is due.

## Neutral period

In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not
start or end on either a Friday or the day before a holiday.

## Normal annuity form

The manner in which retirement benefits are paid out.

## RAMs (Reverse-annuity mortgages)

Mortgages in which the bank makes a loan for an amount equal to a
percentage of the appraisal value of the home. The loan is then paid to the homeowner in the form of an
annuity.

An insurance policy bought by the sponsor of a pension plan for a single
premium. In return, the insurance company agrees to make lifelong payments to the employee (the
policyholder) when that employee retires.

## Subperiod return

The return of a portfolio over a shorter period of time than the evaluation period.

## T-period holding-period return

The percentage return over the T-year period an investment lasts.

## Waiting period

Time during which the SEC studies a firm's registration statement. During this time the firm
may distribute a preliminary prospectus.

## Workout period

Realignment period of a temporary misaligned yield relationship that sometimes occurs in
fixed income markets.

## Accounting period

The period of time for which financial statements are produced â€“ see also financial year.

## Period costs

The costs that relate to a period of time.

## Periodic inventory system

An inventory system in which the balance in the Inventory account is adjusted for the units sold only at the end of the period.

## Annuity

A series of payments or deposits of equal size spaced evenly over
a specified period of time

## Annuity Due

annuity where the payments are to be made at the beginning of
each period

## Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.

## Ordinary Annuity

An annuity where the payments are made at the end of each
period

## Payback Period

The number of years necessary for the net cash flows of an
investment to equal the initial cash outlay

## annuity due

a series of equal cash flows being received or paid at the beginning of a period

## compounding period

the time between each interest computation

## ordinary annuity

a series of equal cash flows being received
or paid at the end of a period

## payback period

the time it takes an investor to recoup an
original investment through cash flows from a project

## period cost

cost other than one associated with making or acquiring inventory

## periodic compensation

a pay plan based on the time spent on the task rather than the work accomplished

## Annuity

A series of payments over a period of time. The payments are usually
in equal amounts and usually at regular intervals such as quarterly,
semi-annually, or annually.

## Odd first or last period

Fixed-income securities may be purchased on dates
that do not coincide with coupon or payment dates. The length of the first and
last periods may differ from the regular period between coupons, and thus the
bond owner is not entitled to the full value of the coupon for that period.
Instead, the coupon is pro-rated according to how long the bond is held during
that period.

## Reporting period

The time period for which transactions are compiled into a set of financial statements.

## annuity

Equally spaced level stream of cash flows.

## annuity due

Level stream of cash flows starting immediately.

## annuity factor

Present value of an annuity of \$1 per period.

## payback period

Time until cash flows recover the initial investment of the project.

## Individual Retirement Annuity

An IRA comprised of an annuity that is managed
through and paid out by a life insurance company.

## Average Amortization Period

The average useful life of a company's collective amortizable asset base.

## Extended Amortization Period

An amortization period that continues beyond a long-lived asset's economic useful life.

## Extended Amortization Periods

Amortizing capitalized expenditures over estimated useful lives that are unduly optimistic.

## Periodic inventory

A physical inventory count taken on a repetitive basis.

## Annuity

A contract which provides an income for a specified period of time, such as a certain number of years or for life. An annuity is like a life insurance policy in reverse. The purchaser gives the life insurance company a lump sum of money and the life insurance company pays the purchaser a regular income, usually monthly.

## Back To Back Annuity

This term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application.

## Deferred Annuity

An annuity providing for income payments to commence at a specified future time.

## Grace Period

A specific period of time after a premium payment is due during which the policy owner may make a payment, and during which, the protection of the policy continues. The grace period usually ends in 30 days.

## Critical Growth Periods

Times in a company's history when growth is essential and without which survival of the business might be in jeopardy.

## Full Credit Period

The period of trade credit given by a supplier to its customer.

## Grace Period

Length of time during which repayments of loan principal are excused. Usually occurs at the start of the loan period.

## Annuity

periodic payments made to an individual under the terms of the policy.

## Guaranteed Interest Annuity (GIA)

Interest bearing investment with fixed rate and term.

## Variable Annuity

A form of annuity policy under which the amount of each benefit is not guaranteed or specified. The amounts fluctuate according to the earnings of a separate investment account.

## Waiting Period (Credit Insurance)

A specific time that must pass following the onset of a covered disability before any benefits will be paid under a creditor disability policy. (Also known as an elimination period).

## Fixed-annuities

annuity contracts in which the insurance company or issuing financial institution pays a
fixed dollar amount of money per period.

## Variable annuities

annuity contracts in which the issuer pays a periodic amount linked to the investment
performance of an underlying portfolio.

## allocation

the systematic assignment of an amount to a recipient
set of categories annuity a series of equal cash flows (either positive or negative) per period

## Structured Settlement

Historically, damages paid out during settlement of personal physical injury cases were distributed in the form of a lump-sum cash payment to the plaintiff. This windfall was intended to provide for a lifetime of medical and income needs. The claimant or his/her family was then forced into the position of becoming the manager of a large sum of money.
In an effort to create a more financially stable arrangement for the claimant, the Structured Settlement was developed. A Structured Settlement is an alternative to a lump sum cash payment in the resolution of personal physical injury, wrongful death, or workersâ€™ compensation cases. The settlement usually consists of two components: an up-front cash payment to provide for immediate needs and a series of future periodic payments which are funded by the defendantâ€™s purchase of one or more annuity policies. Those payors make payments directly to the claimant. In the unfortunate event of the claimantâ€™s death, a guaranteed portion of the settlement may be directed to a beneficiary or his/her estate.
A Structured Settlement is a guaranteed source of funds paid to the claimant or his/her family on a tax-free basis.