# 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

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?