Which of the following statements is CORRECT?
Answer
a. The cash flows for an ordinary (or deferred) annuity all occurat the beginning of the periods.
b. The cash flows for an annuity must all be equal, and they mustoccur at regular intervals, such as once a year or once amonth.
c. If a series of unequal cash flows occurs at regular intervals,such as once a year, then the series is by definition anannuity.
d. The cash flows for an annuity due must all occur at the ends ofthe periods.
e. If some cash flows occur at the beginning of the periods whileothers occur at the ends, then we have what the textbook defines asa variable annuity.
Which of the following statements is CORRECT?
Answer
a. The cash flows for an ordinary (or deferred) annuity all occurat the beginning of the periods.
b. The cash flows for an annuity must all be equal, and they mustoccur at regular intervals, such as once a year or once amonth.
c. If a series of unequal cash flows occurs at regular intervals,such as once a year, then the series is by definition anannuity.
d. The cash flows for an annuity due must all occur at the ends ofthe periods.
e. If some cash flows occur at the beginning of the periods whileothers occur at the ends, then we have what the textbook defines asa variable annuity.
Related questions
Question 1 5 pts
0 multiple_choice_question 22046808
The internal rate of return (IRR) is the interest rate that sets the net present value of the future cash flows equal to ________.
The internal rate of return (IRR) is the interest rate that sets the net present value of the future cash flows equal to ________.
| zero |
| one |
| one hundred |
| none of the above |
Question 2 5 pts
On a timeline, the space between date 0 and date 1 represents the _______ between dates. Letâs assume it is the first year of the loan. Date 0 is the beginning of the first year, and date 1 is the end of the first year.
On a timeline, the space between date 0 and date 1 represents the _______ between dates. Letâs assume it is the first year of the loan. Date 0 is the beginning of the first year, and date 1 is the end of the first year.
| dollar amount |
| present value |
| time period |
| future value |
Question 3 5 pts
As the interest rate __________, present value decreases.
As the interest rate __________, present value decreases.
| decreases |
| increases |
| remains unchanged |
| is unrelated |
Question 4 5 pts
The present value (PV) of a stream of cash flows is the _______ the present values of each individual cash flow
The present value (PV) of a stream of cash flows is the _______ the present values of each individual cash flow
| difference between |
| product of |
| sum of |
| same as |
Question 5 5 pts
When a constant cash flow will occur at regular intervals for a finite number of periods of time, it is called a(n) __________.
When a constant cash flow will occur at regular intervals for a finite number of periods of time, it is called a(n) __________.
| annuity |
| perpetuity |
| interest payment |
| principle payment |
Question 6 5 pts
Edit this Question Delete this Question
0 multiple_choice_question 22047052
There are two basic types of annuities:
There are two basic types of annuities:
| Discounted and compounded annuities |
| Ordinary annuities and annuities due. |
| Future value and present value annuities |
| None of the above |
Question 7 5 pts
The NPV measures the ______ change in shareholder wealth that arises from undertaking a project.
The NPV measures the ______ change in shareholder wealth that arises from undertaking a project.
| consistent |
| dollar |
| annual |
| semi-annual |
Question 8 5 pts
The Net Present Value rule implies that we should compare a projectâs net present value (NPV) to ________
The Net Present Value rule implies that we should compare a projectâs net present value (NPV) to ________
| zero |
| one |
| 100 |
| none of the above |
Question 9 5 pts
To endow a perpetuity is the same as calculating the present value (PV) of a perpetuity. Say you want to endow an annual graduation party at your alma mater. You want the event to be a memorable one, so you budget $30,000 per year forever for the party. If the university earns 8% per year on its investments, and if the first party is in one yearâs time, how much will you need to donate to endow the party?
The formula for PV of a perpetuity = C\r; = $30,000 \ 0.08; =
To endow a perpetuity is the same as calculating the present value (PV) of a perpetuity. Say you want to endow an annual graduation party at your alma mater. You want the event to be a memorable one, so you budget $30,000 per year forever for the party. If the university earns 8% per year on its investments, and if the first party is in one yearâs time, how much will you need to donate to endow the party?
The formula for PV of a perpetuity = C\r; = $30,000 \ 0.08; =
| $3,750 |
| $37,500 |
| $375,000 |
| $3,750,000 |
Question 10 5 pts
With an Ordinary Annuity, payments are required at the ________ of each period. An example of this is bonds which usually pay coupon payments at the end of every six months until the bond's maturity date.
With an Ordinary Annuity, payments are required at the ________ of each period. An example of this is bonds which usually pay coupon payments at the end of every six months until the bond's maturity date.
| beginning |
| middle |
| end |
| payments are not required |
