Which of the Following Is True About Perpetuities

question 32

Multiple Choice

Which of the following is true about perpetuities?

• A) All else equal, the value of a perpetuity is higher when the periodic cash flow is higher.
• B) If two perpetuities have the same present value and the same interest rate, they must have the same cash flows.
• C) All else equal, the value of a perpetuity is higher when the interest rate is lower.
• D) All of the above are true statements.

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Definitions:

Variable Cost Per Unit

The cost that varies with each unit of production or service provided.

Net 30 Credit Policy

A payment term indicating that the payment for goods or services is due 30 days after the invoice date, often used in business-to-business transactions.

Monthly Interest Rate

The interest rate applied to a loan or investment for one month, often used to calculate the monthly interest payments or earnings.