Question

In most cases a paragraph or so for each question will be sufficient. For problems, show your work such as calculator inputs and outputs for full credit.

1. What is a perpetuity? An annuity?

Answer 1

1.Perpetuity:

A perpetuity is an annuity that has no end,or a stream of cash payments that conntinues forever.One of example of a perpetuity is the UK's government bond that is known as Consol.Bondholders will receive annual fixed coupons as long as they hold the amount and the government does not discontinue the Consol.

2.An annuity:

An annuity is a series of payments made at equal intervals.Examples of annuities are monthly home mortgage payments,monthly insurance payments and pension payments.Annuities can be classified by the frequency of payments dates.The payments may be made weekly,monthly,quarterly,yearly or at any other regular interval of time.