Question

Which of the following is an example of purchasing an asset in order to receive a stream of future payments?

1. An investor purchases a home for $300,000 and receives annual payments of $500,000 for making it available for movie sets.
2. An investor purchases a home for $300,000 and expects to rent it out for $3000 per month, indefinitely.

Answer 1

Purchasing a home for rent is an asset investment for receiving a future payment stream, typically through monthly rental income.

Step-by-step explanation:

The example of purchasing an asset in order to receive a stream of future payments is when an investor purchases a home for $300,000 and expects to rent it out for $3000 per month, indefinitely. This scenario is a classic example of an investment property, where the asset (the home) is expected to generate a continuous stream of income through rent payments. In contrast, the first example involving annual payments of $500,000 for making the home available for movie sets seems unrealistic given the purchase price and expected returns, and thus may contain a typo.

The example of purchasing an asset in order to receive a stream of future payments is:

An investor purchases a home for $300,000 and expects to rent it out for $3000 per month, indefinitely.

In this example, the investor purchases a home as an asset and expects to generate a continuous stream of future payments by renting it out. The monthly rental income serves as the stream of future payments.