An immediate annuity is the stream of periodic equal amounts starting immediately. The periodic installments or annuities are the same amounts that are receivable or due after each period. An annuity that involves the first installment being paid or received immediately is also called down payment like the tenants pay one-month advance rent at the start of the rental agreement as security.
An annuity includes the element of interest and principle. For example, you leased a car that requires you to pay annual lease installment of $10,000. For an immediate annuity lease agreement, you will have to pay the first installment at the time of entering into a lease agreement. The first installment will not carry any interest payments in it and it will be the principal only.
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