Bangladesh University of Professionals
Term Paper on
Annuity in Our Daily Life.
Course Code and Tittle
BUS 7102 (Mathamatices for Dicision)
Submitted To
Dr. Md. Showkat Ali
Professor
Faculty of Business Studies
Bangladesh University of Professionals
Submitted By
Tanveer Ahmed Siddquee
Student Id - 23230332008
Master of Business Administration (Professionals)
Batch - 32 and Section - A.
Letter of Transmittal
February 28, 2023 AD
Dr. Md. Showkat Ali
Professor
Department of Business Administration in Management Studies
Faculty of Business Studies
Bangladesh University of Professionals
Subject : Term Paper on
BUS 7102 (Mathamatices for Dicision)
Annuity in our daily life.
Dear Sir,
It is a great pleasure to me to submit my term paper on “Annuity in our daily life”. I would like
to recall with gratitude the generous support and encouragement I received from you. As an
instructor and advisor, you have provided valuable insights and academic knowledge to
improve the quality of my work. With your guidance, completing this term paper was possible.
This Term Paper has been prepared based on collected data, through the interviewing
process, text book and internet. All the annuity related question and problem has been
formulated based on the requirement of this term paper. All the information has been
organized to get the desired result.
I will be pleased to answer any query you think is necessary, as of now and when needed. I
want to draw attention, particularly to the matter that there is always a space for clarification
of any relevant topic. I look forward to your kind and impartial appraisal of this term paper.
Therefore, I hope this term paper will be up to your expectations, and it will be my pleasure
to answer any clarifications and suggestions regarding this term paper.
Sincerely yours,
Sd/Tanveer Ahmed Siddquee
Student Id - 23230332008
Batch - 32, Section - A
Master of Business Administration (Professionals)
Bangladesh University of Professionals.
Annuity in our daily life | 2
Acknowledgement
First and foremost, we want to express my gratitude to Almighty Allah for providing us the
courage to successfully complete group term paper. Additionally, we want to thank our
supervisor Dr. Md. Showkat Ali, Professor, Department of Business Administration in
Management Studies, Faculty of Business Studies, Bangladesh University of Professionals
(BUP), whose comments and direction on the report or term paper helped me write it
correctly and finish it without any issues.
We received cordial and sincere assistance from many concerns when preparing this term
paper.
In addition, we want to thank everyone in our family and circle of friends for always being
there for us when we needed them. They made it feasible for us to do our term paper, without
which it would not have been achievable.
Annuity in our daily life | 3
Abstract
Organizations have been compelled to improve their cost, quality, speed, and flexibility
as a result of competitive advantages in today's global market. The success of a
corporation depends on these four competitive elements. Service firms are not unique
in this regard. This paper aim is to examine the idea of competitive priorities of safety
regulations, health and environmental hazards which is very much essential for any
organization management. To gain a deeper understanding of competitive priorities and
why they are necessary to achieve employees and employers’ satisfaction. We have
gathered 100 responses from office employees and executives at Robotech, RAK
ceramics Limited, Bijoy TV Limited, Advance IT, Solution Art and Bangladesh
Development Bank Limited (BDBL) in Bangladesh. In this research, we have found that
safety plays a vital role in employee satisfaction and a positive relation between
competitive priorities and employee satisfaction. This study will aid in future research on
competitive priorities on safety regulations and minimizing hazards.
Annuity in our daily life | 4
Table of content
Executive Summary
Letter of Transmittal
Acknowledgement
Abstract
Table of Contents
02
03
04
05-06
Part One (Term Paper)
Chapter - 01
Introduction
1.01 Introduction
1.02 How do annuities work?
1.03 Finding the right type of annuity
1.04 Select the right type of annuity
08
08
Chapter - 02
Objective of the Survey
2.01 Background of the Report
2.02 Origin of the Report
2.03 Statement of the Problem
2.04 Importance of the Study
2.05 Objective of the Report
2.06 Scopes of the Study
09-10
09
09
09
10
10
10
Chapter - 03
Literature Review
3.01 Literature Review
11-13
11
Chapter - 04
Methodology and Source of Data Collection
4.01 Methodology and Source of Data Collection
4.02 Data Collection
4.03 Sources of Data
4.04 Data Reliability
4.05 Limitations of the Study
14-16
Chapter - 05
Data Analysis
5.01 Data Analysis
5.02 Companies We Have Surveyed
5.03 Data Collection
5.04 Evaluation
17- 24
17
17
19
20
Chapter - 06
Findings Summary
6.01 Findings Summary
25-27
25
Chapter - 07
Survey Experiences
Survey Experiences
28
28
Annuity in our daily life | 5
Chapter - 08
Recommendation
Recommendation
29-31
29
Chapter - 09
Conclusion
32
Chapter - 10
References
33
Part Two (Appendix)
APPENDIX
Appendix - A
Survey Form
35-36
Appendix - B
Original Survey Sheet
37-38
Appendix - C
Digital Survey Sheet
39-42
Annuity in our daily life | 6
PART - I
(Term Paper)
Annuity in our daily life | 7
Chapter - 01
Introduction
1.01
Introduction
Annuities are powerful financial instruments designed to provide guaranteed
income for life. Whether you’re planning for retirement, seeking long-term
financial security or aiming to diversify your investment portfolio, annuities offer
a customizable solution tailored to you. Discover how annuities can help secure
your financial future.
In investment, an annuity is a series of payments made at equal intervals. Examples
of annuities are regular deposits to a savings account, monthly home mortgage
payments, monthly insurance payments and pension payments.
1.02
How do annuities work?
At their most basic, annuities work by converting a premium into a stream of
payments. The amount and duration of the payments depend on various factors,
including the type of annuity, the premium amount, the annuitant’s age and the
chosen payout option.
Annuities can be optimized for income or long-term growth, but they are not
short-term investment strategies. Most annuities supply income through a process
of accumulation and annuitization. The exception is immediate annuities that
begin paying out as soon as within a month of purchase with no accumulation
phase necessary.
1.03
Finding the right type of annuity
Annuities can be classified by the frequency of payment dates.
There are three main types of annuities: fixed annuities, fixed index annuities and
variable annuities. Annuities can also be classified as immediate or deferred,
indicating when you will begin receiving annuity payments. Your personal goals
and objectives will help determine the best type of annuity for you.
1.04
Select the right type of annuity
There are pros and cons to each type of annuity. You should consider how the
features of different types of annuities work best for your current financial
situation and how each can help you reach your long-term financial goals.
Annuity in our daily life | 8
Figure 01.01 : Risk scale of annuity type
You should also compare several different annuity options, ask yourself how each
meets your needs and talk to a financial professional about how each annuity
you’re considering will help you achieve your goals.
1.05
Uses of annuity
Having a fixed and stable income is important to lead a financially independent
life. An annuity is one of the few ways in which you can enjoy a fixed income at a
pre-decided time. Whether trying to make a retirement plan or looking for a
source of income, buying an annuity can be a great option.
(a)
Tax-deferred growth
You will not pay income taxes on the earnings from your annuity
investments till you begin making withdrawals or getting periodic
payments. Note that withdrawals before age 59½ may be subject to an
additional 10% tax.
(b)
Unlimited contributions
There is no limit to the amount of after-tax money you can place into an
annuity, despite your income level or sources of income.
(c)
Choice of investment options
- Fixed annuities extends a stated rate of return for a specified period.
Variable annuities include various investment options, such as stocks,
bonds, and money market instruments that vary with market conditions.
(d)
No necessary withdrawals
If your annuity is not part of an IRA or a retirement plan, you are not
expected to begin taking minimum distributions after age 72.
Annuity in our daily life | 9
(e)
Death benefit.
Payout methods include insurance features that confirm payment to your
designated beneficiaries if you die before your withdrawals begin. In
most cases, this payment does not need to pass through probate.
The annuity has many advantages but one of the biggest advantages is that it
provides a regular income source throughout life, even after retirement.
There are different annuity plans available for you to choose from. This allows you
to choose the annuity plan that best suits your requirement at the time. Annuity
plans are quite flexible and allow you to customize your plans according to your
needs. You can choose a single life plan or a joint life plan for you and your partner.
According to the Income Tax Act you get certain tax benefits by purchasing an
annuity plan.
So to conclude, an annuity investment is one of the best ways of having a fixed
source of income throughout your lifetime. It is also a great way of planning your
post-retirement life and keeping a steady income even after retirement.
.
Annuity in our daily life | 10
Chapter - 02
Fundamentals of Annuities
2.01
Annuity Meaning
Many people have had the experience of making a series of fixed payments over a
course of time - such as rent, premium or vehicle payments - or obtaining a series
of payments for a course of time, such as the certificate of deposit (CD) or interest
from a bond or lending money. These ongoing or recurring payments are
technically called "Annuities”.
2.02
Types of Annuity
Annuity may be classified in to 02 (Two) categories
(a)
Annuity certain (also known as a guaranteed or fixed annuity)
Annuity certain (also known as a guaranteed or fixed annuity) This
annuity pays you a set amount over a pre-determined period of time. For
example, you can buy an annuity that will pay you $500 a month for 20
years.
The annuity certain may be further classified into 02 (Two) categories
(i)
Annuity Due
An annuity due is an annuity whose payment is due immediately
at the beginning of each period.
A common example of an annuity due payment is rent, as
landlords often require payment upon the start of a new month
as opposed to collecting it after the renter has enjoyed the
benefits of the apartment for an entire month
(ii)
Annuity ordinary (immediate annuity)
An ordinary annuity is a series of equal payments made at the
end of consecutive periods over a fixed length of time. While the
payments in an ordinary annuity can be made as frequently as
every week, in practice they are generally made monthly,
quarterly, semi-annually, or annually.
A common example of ordinary annuities are interest payments
from bonds, which are generally made semiannually, and
quarterly dividends from a stock that has maintained stable
payout levels for years.
Annuity in our daily life | 11
The present value of an ordinary annuity is largely dependent
on the prevailing interest rate.
(b)
Contingent annuity
Contingent annuity is an annuity that is subject to conditions or terms
that must be met before the beneficiary will receive payments.
The most common use of contingent annuities is for life insurance and
pensions which are contingent on someone either being alive or
deceased.
Fixed-period annuities, also known as term deferred annuities, are a type of
annuity that is paid out over a certain period of time.
For example, it might pay out over the course of 10 or 20 years. If you unexpectedly
pass away during the payment term, you can have payments continue to a
beneficiary.
2.03
Present value and future value of annuity
Present value and future value are terms that are frequently used in annuity
contracts. The present value of an annuity is the sum that must be invested now
to guarantee a desired payment in the future, while its future value is the total
that will be achieved over time.
(a)
Present value of annuity
The present value of an annuity refers to how much money would be
needed today to fund a series of future annuity payments. Because of the
time value of money, a sum of money received today is worth more than
the same sum at a future date.
Present value takes into account any interest rate an investment might
earn.
For example, if an investor receives $1,000 today and can earn a rate of
return of 5% per year, the $1,000 today is certainly worth more than
receiving $1,000 five years from now.
(a)
Future value of annuity
The future value of an annuity is the value of a group of recurring
payments at a certain date in the future, assuming a particular rate of
return, or discount rate.
Annuity in our daily life | 12
An example of future value of annuity would be if someone invested
$1,000 today and received an annual payment of $100 for the next 10
years. The future value of this annuity would be $2,614.87 at the end of
10 years.
2.04
Importance of annuity
Annuities allow the contract owner to choose, within contract limits, when and
how to receive annuity income payments. Annuity options are available that can
guarantee income for life, for a specific period of time, or both.
Annuity in our daily life | 13
Chapter - 03
Mathematical Formulas of Annuities
3.01
information required for annuity formula
The present value and future value of an annuity is affected by the interest rate,
the length of time until the payments are received, and the amount of each
payment.
To calculate the present value of an annuity, you will need to know the interest
rate, the length of time until the payments are received, and the amount of each
payment.
(a)
Payment amount
Amount of money you envision getting paid by period
(monthly, quarterly or annually).
(b)
Interest rate
The interest rate per period.
(c)
Number of time periods
(d)
Type of annuity
The information is needed to calculate present value of an annuity.
3.02
Mathematical Symbol that used in formula
To describe the mathematical we use the following symbol. Lets
a
n
i
P or
PV
F or
FV
3.03
annual payment
(instalment per period)
number of year
(Number of period)
interest rate
(interest rate per period)
Present Value
Future Value
Present value of annuity calculation
The present value of annuity is the current value of the total amount of annuity at
the end of the given period. In others word, Present value of a given sum if money
Annuity in our daily life | 14
due at the end of a certain period of time is the sum of principal amount plus
interest accumulated at the given rate for the same period.
3.04
(a)
Present value of ordinary annuity (or Immediate annuity)
(b)
Present value of annuity Due
Future value of annuity calculation
The future value of an annuity is the sum of all payments made and interest earned
on them at the end of the term of annuities.
(a)
Future value of ordinary annuity (or Immediate annuity)
(b)
Future value of annuity Due
Perpetual annuity is an annuity whose payment continues forever. As such the
amount of perpetuity is undefined as the amount increases without any limit as
time passeson.
We know that the present value of P of immediate annuity is given by
Annuity in our daily life | 15
Now as per the definition of perpetual annuity as
We know that
Since 1+i>1, Hence
Annuity in our daily life | 16
Chapter - 04
Annuity function in Microsoft Excel
4.01
Annuity Functions in Excel
Microsoft Excel provides various functions to perform constant annuity
calculations. These functions can be used for both loans and investments.
Constant annuities are streams of equal cash flows occurring at equal intervals.
All annuities are governed by a set of variables. Excel provides functions for all
these variables. These variables are:
Rate
The interest rate per period
Nper
Total number of periods in the annuity
PMT
The payment per period
PV
The present value of cash flows. The total amount that a series
of future cash flows is worth now.
FV
The future value of cash flows based on periodic, equal cash
flows.
Type
Select Annuity Type
(Type is whether the annuity is a regular or an annuity due. Use
0 for regular annuities, and 1 for annuity due.)
(By default type is 0.)
An additional input is the “Type”, which is 0 for a regular annuity or annuity in
arrears where the first payment occurs one period from now and 1 for an annuity
due or annuity in advance where the first payment occurs now.
Any variable given in squared brackets is optional.
There are five key functions to calculate different aspects of an annuity:
(a)
PV( rate, nper, pmt, [fv], [type])
This function calculates the present value of an annuity, once we have
the periodic payments.
(b)
FV( rate, nper, pmt, [pv], [type])
This function calculates the present value of an annuity, once we have
the periodic payments.
Annuity in our daily life | 17
(c)
PMT( rate, nper, pv, [fv], [type])
This function calculates the periodic payments in an annuity.
(d)
NPER( rate, pmt, pv, [fv], [type])
This function calculates the number of payments in an annuity.
(e)
RATE( nper, pmt, pv, [fv], [type],[guess])
This function calculates the interest rate earned in the annuity. Guess is
your guess for what the rate will. By default its value is 0.10.
Figure 4.01: Annuity calculation in Microsoft Excel.
We can easily calculate all types annuity using by using Microsoft Excel formulas
or function and find the desire value.
Annuity in our daily life | 18
Chapter - 05
Annuity calculation in Microsoft Excel
5.01
Annuity calculation in Microsoft Excel
Now we solve some problem tha already calculate by paper and pencil from our
Reference Books “Business Mathematics” by Dr. Md. Rafiqul Islam and Dr. M.
Osman Gani.
5.02
Books Example
Somes book example are shown below.
Annuity in our daily life | 19
Books Example (Retained Out Profit)
Annuity in our daily life | 20
Annuity in our daily life | 21
Chapter - 06
Findings Summary
6.01
Findings Summary
Annuity in our daily life | 22
Chapter - 07
Survey Experiences
7.01
Survey Experiences
Annuity in our daily life | 23
Chapter - 08
Recommendation
Annuity in our daily life | 24
Chapter - 09
Conclusion
9.01
Conclusion
Annuity in our daily life | 25
Chapter - 10
Reference
10.01
Reference
(1)
Reijula, K., & Sundman-Digert, E. (2004). Causes of indoor air complaints in
office workplaces: A study based on 11,000 employees. Indoor and Built
Environment, 13(5), 391-397.
(2)
Danna, K., & Griffin, R. W. (1999). Health and well-being in the workplace:
A review and synthesis of the literature. Journal of management, 25(3),
357-384.
(3)
Conti, G., Federici, G., & Stenius, U. (2008). Health and safety practices in
the nanomaterials workplace: Results from an international survey. Journal
of Nanoparticle Research, 10(3), 483-495.
(4)
Adamopoulos, C., & Syrou, V. (2022). Occupational health and safety
hazards in the public health sector in Greece: A systematic review. Safety
Science, 139, 106369.
(5)
Chu, C., & Dwyer, S. (2002). Employer role in integrative workplace health
management: A new model in progress. Disease Management and Health
Outcomes, 10, 175-186.
(6)
Klein, L. W., Miller, D. L., Balter, S., Laskey, W., Haines, D., Norbash, A., ... &
Goldstein, J. A. (2009). Occupational health hazards in the interventional
laboratory: time for a safer environment. Radiology, 250(2), 538-544.
(7)
Bhandari, P. (2023, January 16). What Is a Likert Scale? | Guide & Examples.
Scribbr. https://www.scribbr.com/methodology/likert-scale/
Annuity in our daily life | 26
PART - II
(Apendex)
Annuity in our daily life | 27
Appendix - A
Appendix - B
Annuity in our daily life | 28