In an annuity, the advantage an investor enjoys is that if he receives an amount greater than the initial payment, then it is considered a gain. Annuities can be used as tax shelters by the wealthy and as sources of guaranteed income by those who are risk-averse. There are two main types of annuities; the first type is a tax-deferred annuity and the second is an income annuity. Deferred annuity takes place after a certain time when the final premium is paid. Income annuity is purchased at a specific amount by people who are about to retire. The purpose of choosing the annuity is to provide meaningful knowledge regarding the final decision that would be made by the investor. As it is a long term investment, this method will therefore give an idea to invest it or not. The final decision can be seen by the result of net present value and discounted cash flow. After these calculations, the investor will be able to make decisions. Examples include mortgage payments, pension payments, insurance payments, etc. This can be done monthly, quarterly, semi-annually and annually. Two types of income need to be calculated for the final decision; the first is an ordinary annuity and the second is an annuity due but not paid. (Scott,