Annuity Method Of Depreciation
Categories: Trusts and Estates, Insurance, Retirement, Investing, Tax, Metrics
In life, lots of things depreciate in value as they get older. (Unlike you. You’re a fine wine, darling. You get better with age.) The annuity method of depreciation is how you’ll figure out the change in value of something you own.
As noted by Farlex Financial Dictionary, the formula for this involves figuring out the internal rate of return (how much interest you get, which is a whole different story) times how much your asset was worth at the beginning of time. After this, you deduct how much it’s worth from how much it brings in on a yearly basis. Theeeeeen you take this figure and subtract it from how much it was worth LAST year. Yeah, it’s kind of complicated, but we can teach you how to do this when you’re ready.
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Finance: What is Perpetuity?44 Views
finance a la shmoop. what is a perpetuity? forever. that's what you should think
when you hear the word perpetuity. well a perpetuity is a cousin to an annuity.
in an annuity you invest a given amount of money and then you get a portion of [100 dollar bill]
that dough paid out to you over a set number of years, or in the vein of a life
insurance policy it gets paid out until you are you know doing backstroke Six
Feet Under. and annuity sunsets well basically when you. do but a perpetuity [skeleton in the ground]
outlives you. it pays forever even when you're dead. so why would anyone want one
of these things? well they work for university scholarship endowments. you
know like think about a great Italian literature philanthropist named well
let's say Bella pepperoni. no offense to our Italian shmoopers out there. she made [woman wears name tag]
her fortune analyzing the works of Dante and Machiavelli and wants to endow a
scholarship for other PhDs in Italian Lit forever. well she'd put in say a
million bucks and it might get invested in half and bonds half in stocks with
yield and the throw from that million bucks might be something like a four or
five percent a year or forty or fifty grand and that would be more than enough [equations on screen]
to cover the basics for a PhD in Italian lit well more or less forever as
dividends get raised in stocks bro and all that stuff. the million bucks just
remains invested 50/50 stocks and bonds and the world continues to spin so yeah
even when she's no longer around to enjoy the fruits of her labor as well [headstone shown]
that fruit doesn't spoil develop mold and start to smell bad even if we can't
say the same for her. sorry. just keeping it real. [woman's picture next to casket.]
that's perpetuity. goes forever. perpetual.
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Technically, an annuity is any kind of regularly scheduled payment, usually made annually, quarterly or monthly...for the life of the recipient. Ev...