|Back To Back Annuity|
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Definition of Back To Back Annuity
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.
the present value of a finite stream of cash flows for every beginning $1 of cash flow.
A regular periodic payment made by an insurance company to a policyholder for a specified period
A series of payments or deposits of equal size spaced evenly over
A series of payments over a period of time. The payments are usually
Equally spaced level stream of cash flows.
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.
Periodic payments made to an individual under the terms of the policy.
An annuity with n payments, wherein the first payment is made at time t = 0 and the last
annuity where the payments are to be made at the beginning of
a series of equal cash flows being received or paid at the beginning of a period
Level stream of cash flows starting immediately.
Present value of $1 paid for each of t periods.
Present value of an annuity of $1 per period.
An annuity with a first payment on full period hence, rather than immediately.
The time between each payment under an annuity.
Bond or note secured by assets of company.
A security that is collateralized by loans, leases, receivables, or installment contracts
The fee paid on the extension date if the buyer wishes to continue the option.
The subsequent subtraction from inventory records of those parts used
Brokerage house clerical operations that support, but do not include, the trading of stocks and
An intercompany loan channeled through a bank.
A loan in which two companies in separate countries borrow each other's currency for a
1) When bond yields and prices fall, the market is said to back-up.
A procedure for making the effective date of a policy earlier than the application date. backdating is often used to make the age of the consumer at policy issue lower than it actually was in order to get a lower premium.
a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires
A market condition in which futures prices are lower in the distant delivery months than in
Another term for a repo.
a system using transfer prices; see transfer
An annuity providing for income payments to commence at a specified future time.
Deferred nominal life annuity
A monthly fixed-dollar payment beginning at retirement age. It is nominal
Discounted payback period rule
An investment decision rule in which the cash flows are discounted at an
With respect to a project financing, an arrangement under which the sponsors of a project
Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.
Equivalent annual annuity
The equivalent amount per year for some number of years that has a present
The retrospective process of measuring performance, comparing it with plan and taking corrective action.
Guaranteed Interest Annuity (GIA)
Interest bearing investment with fixed rate and term.
Individual Retirement Annuity
An IRA comprised of an annuity that is managed
Limitation on sale-and-leaseback
A bond covenant that restricts in some way a firm's ability to enter into
An option that allows the buyer to choose as the option strike price any price of the
The offsetting of a current year loss against the reported taxable
Securities backed by a pool of mortgage loans.
Mortgage-Backed Securities Clearing Corporation
A wholly owned subsidiary of the Midwest Stock
Normal annuity form
The manner in which retirement benefits are paid out.
Normal backwardation theory
Holds that the futures price will be bid down to a level below the expected
An annuity where the payments are made at the end of each
a series of equal cash flows being received
The length of time it takes to recover the initial cost of a project, without regard to the time value of money.
A method of investment appraisal that calculates the number of years taken for the cash flows from an investment to cover the initial capital outlay.
The length of time required for the net revenues of an investment for the net revenues of an investment to return the cost of the investment.
A capital budgeting analysis method that calculates the amount of
The number of years necessary for the net cash flows of an
the time it takes an investor to recoup an
Time until cash flows recover the initial investment of the project.
Related: retention rate.
Fraction of earnings retained by the firm.
RAMs (Reverse-annuity mortgages)
Mortgages in which the bank makes a loan for an amount equal to a
Sale and lease-back
Sale of an existing asset to a financial institution that then leases it back to the user.
Sale and Leaseback
An agreement in which the owner of a property sells that property to a person or institution and then leases it back again for an agreed period and rental.
Single-premium deferred annuity
An insurance policy bought by the sponsor of a pension plan for a single
Stripped mortgage-backed securities (SMBSs)
Securities that redistribute the cash flows from the
The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.
Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously
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.
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