Question

Richard takes the opinion of his investment advisor to invest any excess savings that he has. His advisor told him about a new issue of AAA rated bonds. Richard decided to buy a total of 100 bonds from this issue. The issuing company will be making the coupon payments of $1,000 every six months. The initial investment and the subsequent receipt of coupon payments can be referred to as _____ and _____ respectively.

a. lump sum payment; uneven cash flows
b. lump sum payment; ordinary annuity
c. uneven cash flows; lump sum payment
d. lump sum payment; annuity due

Answer 1

The answer is "Option b".

Step-by-step explanation:

A lump-sum payment is always a big amount, payable in one transaction rather than in installments. They usually relate to pensions as well as other pension systems, such as 401 K accounts, for which seniors accept a smaller payment in front instead of a greater amount given throughout time.

The ordinary rent is also an equitable payment season made for a specified duration after time steps. Payment is usually made monthly, quarterly, semi-annéely, or yearly, even if in ordinary annuities as frequent just like every week.

In his perspective, Richard invests financial organization or anything in his investment consultant. Their consultant promised him a fresh AAA-rated bond offering. Richard opted to purchase from this offering a total of 100 bonds. Every six months the issuing corporation pays for a coupon of $1000. The original cost and future receipt of accrued interest might be called lump sum and ordinary annuities.