ordinary annuity

Ordinary Annuity

An annuity with payments that are made at the end, rather than at the beginning, of a period. For example, an ordinary annuity may require payments at the end of the month instead of at the beginning. Many credit cards have ordinary annuity payments, while most lease agreements, for example, do not.

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ordinary annuity

An annuity that makes payments at the end of each period. Compare annuity due.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

ordinary annuity

A series of equal payments, made at the end of each payment period. Contrast with annuity due, which is a series of equal payments made at the beginning of each period. A mortgage payment is an ordinary annuity, because the payment is made after a month's worth of interest has accrued. Rent payments are annuities due, because payment is made in advance at the beginning of each month. The difference is important for proper formula entries in financial calculators, or for Excel, as the formula is slightly different if the payments are ordinary annuities or annuities due.

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