Actuarial & Insurance

Intermediate

Future Value of an Annuity

Accumulated value of regular contributions.

Formula

FV = P \frac{(1+r)^n - 1}{r}

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Variables

FVFuture value

PPayment per period

rInterest rate

nPeriods

Example

P=$5k, r=5%, n=30: FV ≈ $332,200

Did You Know?

Starting an annuity ten years earlier can nearly double the final pot, thanks to compounding.

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More in Actuarial & Insurance

Pure Premium

Expected claim cost per policy: frequency times severity.

Gross Premium

Premium that covers claims plus an expense/profit load.

Loss Ratio

Claims paid divided by premiums earned.

Combined Ratio

Total cost ratio: losses plus expenses vs premium.

Expected Value of a Claim

Probability-weighted average of possible claim amounts.

Present Value of an Annuity

Value today of a stream of future payments.