Lump Sum And Present Value Annuity Essay

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Lump-sum and Present Value Annuity

The present value of a lump sum in contrast to the present value of an annuity in particular investments payouts, compensation or contests agreements can be considered as either a lump-sum payment, or otherwise annuities payments. Nonetheless, lump-sum payments offer the full payout amount to the recipient at once, while annuities disperse payments throughout the long term. Notably, lump-sum, and annuities payments present unique disadvantages, and advantages, whereas each is proficient to diverse economic situations, and investors. In essence, annuity-holders receive a systematic regulated payout, whereas, throughout the life of the contract interest is hoarded on the continuing balance, whereas, correspondingly, investors keep their money secure by utilizing the return to neutralize inflation. Nevertheless, annuities can be procured by investors at face value, whilst over the life of the contract receive a structured payout, while turning a profit in the end. By the same token, lottery-winners, and professional athletes are frequently compensated with annuity contracts as a method of payment their monies (Ingram, 2017). …show more content…

Additionally, most financial provisions are structured as an annuities that encompasses mortgage, rent payments, retirement benefits, insurance premiums, and salaries paid. Notably, the difference between an annuity due, and an ordinary annuity lies in the timing of each payment comparative to the period the payment comprises (David R Frick & Co, CPA,

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