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Annuity Derivation vs. Perpetuity Derivation of the Time Value of Money

The differences between an annuity derivation and a perpetuity derivation of the time value of money is due to differences in time periods. Since the life of an annuity differs from the life of a perpetuity, an annuity uses a compounding interest rate to calculate its present value or future value, while a perpetuity uses the stated interest rate or discount rate only. Several different kinds of annuities do exist, however, and some seek to replicate features of a perpetuity.

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Post Author: Brian J Stidham- Lic#0M76252

Independent Insurance Agent | LifePro Financial Services, Inc.

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