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Deferred annuities

R

r_narshi

Member
I've started revising and have been going through some of the notation for annuities. I noticed an inconsistency between the definition of the present value of a deferred annuity (X) in the notes Ch2, Section 6.1,page 15 and the corresponding definition in the summary at the very on of the chapter. I'm referring to the <= and > conditions on Kx and n. I think the summary defnition is correct, but i'm not 100% sure - would someone confirm or otherwise please? The definition of a deferred annuity-due that is used in solution 2.7 is consistent with the corresponding deferred annuity in the summary.

Also i realised that the summary doesn't cover deferred annuities-due or the variance of deferred annuities: is there any particular reason for that?
 
Annuity in arrears

Hi r_nashi,

When Kx = n we have Kx - n = 0 and a0 = 0, so it doesn't matter where the weak inequality goes. Having said that, it would have been better for us to have had the same text in both places to avoid this confusion!

The summary can't cover everything otherwise it wouldn't be a summary :) We have to strike a sensible balance between giving all the key information and not "spoon-feeding" students. It is more important to understand the general principles than to learn parrot-style the EPV and Variance of every single possible variant of annuity. I personally think this is a good reason to not "overload" the summary in an aim to make it exhaustive for parrots! :)

Having said that, the variance of a deferred annuity is actually on the same summary page pretty much when you consider that a deferred annuity is a whole life annuity less a temporary one - have a go at working it out ;-)

Good luck!
John
 
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