Approximation Error in Annual Annuity Payment

In this paper, we propose an approximate method for estimating the annuity payment using simple interest, avoiding the need for compound interest calculations. When comparing the proposed approximation method to conventional formulas that rely on compound interest, some errors might occur in terms of theoretical accuracy. Particularly when parameters (such as the number of years and interest rate) become large, the approximation error can increase. However, if the parameters are not excessively large, this method is practical and provides sufficient accuracy. Therefore, recognizing the presence of approximation errors, the practical benefits of the proposed method outweigh their theoretical drawbacks. With this approach, accurate annuity payment can be estimated while avoiding compound interest calculations. This approach provides a significant practical advantage, enabling the general public to estimate annuity payment easily without relying on pension experts or tools such as EXCEL.