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Annuity is a series of equal payments at regular intervals

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Annuity is a series of equal payments at regular intervals. Literally, annuity means payment made annually. But it can also refer to payment made at different segmental payment period. Classification of Annuity based on the Interest Period and Payment Interval 1. Simple Annuity - is an annuity where the payment interval coincides with the interest conversion period. For example, P10,000 invested at the end of every six months for 2 years and that 15% interest is paid compounded semiannually. 2. General Annuity - is an annuity where the payment interval does not coincide with the interest conversion period. For example, every 3 months, a father deposited P15,000 in a trust fund for the son's education for 8 years. The money earns 12% compounded monthly. The payment period is not equal to the interest period. Classification of Annuity based on Payment Schedule 1. Annuity Due - is an annuity that is paid or received at the beginning of the time period. 2. Ordinary Annuity - is an annuity that is paid or received at the end of a time period. 3. Deferred Annuity - the periodic payment is not made at the beginning nor at the end of each payment interval, but at some later date.