Annuity
Principles of Finance glossary · Time Value of Money
Definition
A series of equal cash flows occurring at regular intervals.
Annuity in plain English
An annuity is simply the same payment, showing up over and over on a regular beat — say $500 every month, or $5,000 every year. The word sounds fancy, but it just describes any predictable, equal, repeating cash flow, like a subscription you receive or a bill you pay. Finance people care because a steady stream like this is easy to add up and value: if you know the payment, the timing, and the interest rate, you can figure out exactly what the whole series is worth today. It's the basic building block behind loans, pensions, and lottery payouts.
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