Definition of Deferred Annuity
A deferred annuity is an annuity that starts after at least one period after the initial investment. Normally the projected cash flows in a project assume that the cash inflows will start in the first period after the initial investment. But this might not be the case always. The cash inflows may start after a delay of a few periods.
Assume a project that has an initial outlay of $50,000 and it will start generating $16,000 for the next 10 years starting five years from now. This is a deferred or delayed annuity.
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