Question

An annuity stream where the payments occur forever is called a(n): A. annuity due. B. indemnity. C. perpetuity. D. amortized cash flow stream. E. ordinary annuity.

Answer #1

Perpetuity refers to the cash flows that occur at a specified interest rate for an indefinite time period.

Value of perpetuity as on today for fixed cash flows can be computed as=Annual cash flow/interest rate.

Hence the correct option is **c.perpetuity.**

On the other hand;an ordinary annuity is equal cash flows at a specified interest rate at end of each year for fixed interval of time.

Also annuity due is equal cash flows at a specified interest rate at beginning of each year etc for fixed interval of time.

It is a type of annuity where payments are made indefinitely or
forever.
-ordinary annuity
-annuity due
-perpetuity
-deferred annuity
It is the sum of the first cost and the present worth of annual
maintenance and operational costs, costs of repair and the renewal
costs.
-annual cost
-capitalized cost
-marginal cost
-future worth cost
A method of computing depreciation which is not applicable if
salvage value is zero.
-straight line
-sinking fund
-SYD
-declining balance
It pertains to series of...

15.a Calculate the
FV of (a) an ordinary annuity and (b) an annuity due with payments
of $2,000 at the interest rate of 12% per year. (a)
$(
);
(b) $(
)
15.b Calculate the
PV of (a) an ordinary annuity and (b) the annuity due with 5
payments of $2,000 at the interest rate of 12%. (a)
$(
); (b)
$(
)
(Please hand write
and show all steps of the solution no Excel no typing I need to...

An ordinary annuity has a present value of $1,000,000. The
annuity has monthly payments.
The interest rate on the annuity is 10% APR. Which of the
following represents the present value
if this were an annuity due?
a. $1,000,000 x 1.01
b. $1,000,000 / 1.10
c. $1,000,000 / 1.008333333
d. $1,000,000 x 1.008333333
e. $1,000,000 x 1.10
If you double the initial investment, then the future value will
be more than doubled for a multi-period investment, everything else
equat (Hint:...

The present value of an annuity represents:
A. The coupon rate of an annuity contract
B. The discounted cash flow a series of payments
C. The total estimated value of future annuity payments adjusted
for the interest rate
D. The current value of a future payment

You have just won the lottery! You decide to take your winnings
as a series of $1,000,000 payments for the next 20 years with the
first payment being paid today. What method should we use to value
the series of payments?
Select one:
a. Ordinary Annuity
b. Ordinary Perpetuity
c. Compounding Annuity
d. Annuity Due
e. None of these describes how the series of payments should be
valued.

How do I work this problem?
Annuity payments are assumed to come at the end of each payment
period (termed an ordinary annuity). However, an exception occurs
when the annuity payments come at the beginning of each period
(termed an annuity due).
What is the future value of a 13-year annuity of $3,000 per
period where payments come at the beginning of each period? The
interest rate is 11 percent. Use Appendix C for an approximate
answer, but calculate your...

ANNUITY CALCULATIONS Consider an investment scenario involving a
level stream of three annual payments of $5,500 each (i.e., an
annuity). The first payment occurs at the beginning of the first
year, and the subsequent payments occur at the beginning of each of
the next two years. The invested balance will accrue interest at 5%
per year, compounded annually. a) Calculate the accumulated balance
at the end of the third year then verify your answer by reference
to the appropriate future...

3. What is the present value of a 5-year ordinary annuity with
annual payments of $200, evaluated at a 10%?
a. $ 670.44 b. $ 758.16 c. $1,121.70 d. $1,470.21 e.
$1,500.00

Which of the following statements is CORRECT?
a. The present value of a 3-year,
$150 annuity due will exceed the present value of a 3-year, $150
ordinary annuity.
b. An investment that has a nominal
rate of 6% with semiannual payments will have an effective rate
that is smaller than 6%.
c. If a loan has a nominal annual
rate of 8%, then the effective rate can never be greater than
8%.
d. The proportion of the payment
that goes...

Which of the following is/are correct?
a. An annuity has a greater future value than an annuity due, all
else the same.
b. More frequent compounding increases the effective annual rate,
all else the same.
c. An asset with an infinite number of future cashflows attached to
it cannot have a finite value today.
d. An annuity due is worth more today than an annuity, all else the
same.
All else the same, if expected inflation declines, the value of...

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