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Chapter 4: Q7DQ. (page 279)

What is a deferred annuity?

Short Answer

Expert verified

Deferred annuity refers to a financial arrangement under which an annuity payment or receipt is committed after a certain time in the future.

Step by step solution

01

Meaning of annuity

Annuity refers to a stream of payment that is paid or received over uniform time intervals for a particular period of time.

02

Reason for choosing daily compounding

Deferred annuity involves an annuity payment or receipt after a particular point of time in the future. For instance, a monthly annuity of $1,000 at 7% rate of interest for 5 years which is to be paid after 2 years is an example of a deferred annuity.

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