Annuity in advance definition
/What is an Annuity in Advance?
An annuity in advance is a series of payments that are due at the beginning of each successive time period. Rent and insurance premiums are commonly billed in advance of the periods to which they apply.
Example of an Annuity in Advance
An example of an annuity in advance is a $3,000 monthly rental payment on a property, which is due at the start of the period for which the rent is intended. As the example indicates, payment is due prior to the consumption of what was purchased.
Annuity in Advance vs. Annuity in Arrears
Another form of annuity is the annuity in arrears, where payment is due at the end of each successive time period. The present value of an annuity in advance is always higher than an annuity in arrears, since cash flows occur sooner.
Terms Similar to Annuity in Advance
An annuity in advance is also known as an annuity due.