Question

Which of the following statements is true? Select one: a. In an annuity due payments occur at the end of the period. b. In an ordinary annuity payments occur at the end of the period. c. A perpetuity will mature at some point in the future. d. One cannot calculate the present value of a perpetuity.

Answer 1

Answer:

b. In an ordinary annuity payments occur at the end of the period

Explanation:

Why the other options are false:

A.- On annuity due, the payment occurs at the beginning of the period.

B.- The perpetuity will not mature. It will yield interest for an indefinite period of time

C.- The present present value of a perpetuity is calculate as follow:

cash inflow/ interest rate = perpetuity

On an ordinary annuity, the payment occur at the end of the period, which is correct.