Question

Which of the following statements is CORRECT? a. The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods. b. If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity. c. The cash flows for an annuity due must all occur at the beginning of the periods. d. The cash flows for an annuity may vary from period to period, but they must occur at regular intervals, such as once a year or once a month. e. If some cash flows occur at the beginning of the periods while others occur at the ends, then we have what the textbook defines as a variable annuity.

Answer 1

The cash flows for an annuity due must all occur at the beginning of the periods because this will be discounted accordingly when they are occurring at the beginning of the periods.

other statements are not representing the true facts because cash flows of an ordinary annuity all must not be operating at beginning of the period or series of unequal cash flows statements are not true.

Correct answer would be option ( C)The cash flows for an annuity due must all occur at the beginning of the periods.