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    The present value of a stream of equal cash flows occurring at regular intervals of time can be computed using a financial calculator. In this case, the amount of each cash

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    1.The present value of a stream of equal cash flows occurring at regular intervals of time can be computed using a financial calculator. In this case, the amount of each cash
    flow is input as the:
    a. present value.
    b. payment.
    c. future value.
    d. number of time periods.
    e. interest rate per period.

    2. Which one of the following is an annuity but NOT a perpetuity?
    a. $300 every two to three weeks for one year
    b. a monthly payment of $425 forever
    c. payments on the first day of each month in varying amounts for ten months
    d. $600 on the last day of each month for two years
    e. $400 on the first day of the second, fifth, seventh, and tenth months of each year

    3. Which one of the following has the highest effective annual rate?
    a. 6 percent compounded annually
    b. 6 percent compounded semi-annually
    c. 6 percent compounded quarterly
    d. 6 percent compounded monthly
    e. 6 percent compounded daily

    4. Which one of the following best defines an annuity?
    a. stream of increasing annual dividend payments over an infinite period of time
    b. a stream of decreasing payments occurring at regular intervals for a fixed period of time
    c. a level stream of payments occurring at equal intervals of time
    d. a level stream of payments occurring at random intervals for an infinite period of time
    e. a series of equal payments occurring at random intervals over a fixed period of time

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    Solution Summary

    Which one of the following best defines an annuity?

    $2.19

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