Question

Which of the following are characteristics of a perpetuity? A. A perpetuity is a stream of regularly timed, equal cash flows that continues forever.B. A perpetuity is a stream of unequal cash flows.C. The value of a perpetuity cannot be determined.D. The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distance (in the future) cash flows.

Answer 1

Answer:

A. A perpetuity is a stream of regularly timed, equal cash flows that continue forever

D. The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distance (in the future) cash flows.

Explanation:

First, we need to note that perpetuity is a term used in finance to refer to any continuous periodic payments of equal face value. In other words, the payments last forever.

Part of the characteristics of perpetuity is that the payments are of equal cash value and the current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows rather than by the discounted value of its more distance (in the future) cash flow.