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What Are Annuities?Annuities are a series of fixed payments generally paid to you for a specified frequency over the course of a fixed period of time. The frequencies are usually yearly, semi-annually, quarterly or monthly. There are two types of annuities: ordinary annuities and annuities due.
•Ordinary Annuities require payments at the end of each period. For example, straight bonds usually make coupon distributions at the end of every six months until the bond matures.
•Annuity Due payments are made at the beginning of each period. Rent, for example, is paid upfront prior to moving in and then paid on the first of each month from that point on.
Additional examples of annuities are regular deposits to a savings account, monthly home mortgage payments and monthly insurance payments. Annuities are classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other interval of time.