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Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions.

1. Which of the following are characteristics of a perpetuity?
Check all that apply.
A. A perpetuity is a stream of unequal cash flows.
B. A perpetuity is a stream of regularly timed, equal cash flows that continues forever.
C. The value of a perpetuity cannot be determined.
D. The value of a perpetuity is equal to the sum of the present value of its expected future cash flows.

User Curtor
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2 Answers

7 votes

Answer:

The correct answers are letters "B" and "D": A perpetuity is a stream of regularly timed, equal cash flows that continues forever; The value of a perpetuity is equal to the sum of the present value of its expected future cash flows.

Step-by-step explanation:

Perpetuity means endless. In finance, a perpetuity is a flow of money that will be regularly received without a specified end date. The definition of perpetuity is used when determining an annuity's present value. The formula for this is:


PV = (C)/(R)

  • PV = present value
  • C = cash flow
  • R = discount rate

In other words, perpetuity equals the sum of the present value of the stream of future cash flows.

User Sangeetha Krishnan
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4 votes

Answer:

The answer is D. The value of a perpetuity is equal to the sum of the present value of its expected future cash flows.

Step-by-step explanation:

verification.

A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever.

User Andrea Richiardi
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