Thank you so much. I'm glad you're learning!

Sir I am from India, where are you from?

yesss

Hi Vivek. That's a good question. The reason to use an annuity in that case is because most people don't have all of the money ($5000) right at the start... if they did, then you are correct that it would be best for them to invest it all right away. Usually, though, people get a paycheck each month (or week or year, etc), and they invest their money accordingly over monthly (or weekly or yearly) intervals. Does that make sense?

@@michaelfulkerson2486 Thankyou.I had one more question why future worth of each annuity is calculated separately .If you pay 500$ at the end of year then at the end of second year amount should be $500(new annuity)+500(1+i)^1 why it is calculated separately like 500(i+1)^5+500(i+1)^4+....?????

* Introduction to Annuities

It's because there will also be a payment at the end of the 10th year, too. So the 1st payment will be at the end of the 1st year (and it will have 9 years to grow), the 2nd payment will be at the end of the 2nd year (and it will have 8 years to grow, etc, until finally the 10th payment will be at the end of the 10th year (and it will have 0 years to grow; i.e. it won't grow at all). I hope that makes sense!

@@michaelfulkerson2486 sir this is ok but still I think as you said in the previous video in the introduction one where we took 5 years , here also instead of 10 , 9 would be appropriate. As you said in 10th years it's not growing so why do we need to consider that cash flow since it is not compounding. Clarify again please

@@tadepalliraghavasai7694 Notice in the previous video, that we ultimately used 6 (instead of 5) in the final formula.

Yeah, it's a little tricky. The main thing is to use the parentheses correctly.