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A stream of cash flows that grows at a constant rate for a finite period is called a(n) _____.

a) Perpetuity
b) Annuity
c) Gradient
d) Geometric gradient

1 Answer

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Final answer:

A stream of cash flows that grows at a constant rate for a finite term is called a 'geometric gradient'. This term describes a pattern where each cash flow is a fixed percentage larger than the previous one.

Step-by-step explanation:

A stream of cash flows that grows at a constant rate for a finite period is known as a(n) geometric gradient. The characteristics provided do not match a perpetuity, which has an indefinite number of periods, or an annuity, which typically has a fixed payment for each period. They do not align with a simple gradient either, which would refer to a series where the cash flow changes by a constant amount each period (not a constant rate). Therefore, the correct answer is 'd) Geometric gradient', representing a flow that starts at an initial value and then grows by a constant percentage in each subsequent period until the end of a finite term.

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