1. An annuity is a series of equal payments that a financial institution makes to an investor. These payments are made at the end of each period (usually a month or a year) for a specific period of time.

2. To set up an annuity, an investor and a financial institution sign a contract in which the investor agrees to transfer a specific amount of money to the financial institution. In turn, the financial institution agrees to pay the investor a set amount of money at the end of each period for a specific number of years.

3. A compound annuity is a type of investment in which you deposit a set sum of money into an investment vehicle at the end of each year, and then you allow that money to grow for a set number of years.

4. The relationship between interest rates and present value is an inverse relationship; as the interest rate increases, the present value decreases. For example, if an individual has a goal to retire with a million dollars in the bank, then the present value amount of money needed to invest will be smaller and smaller as the interest rate obtained gets larger and larger.

5. Inflation is an increase in the volume of available money in relation to the volume of available goods and services. Inflation impacts investments negatively because it results in decreased spending power for each dollar you have earned.