Which One of the Following Statements Related to Annuities and Perpetuities

question 21

Multiple Choice

Which one of the following statements related to annuities and perpetuities is correct? 

• A) An ordinary annuity is worth more than an annuity due given equal annual cash flows for 10 years at 7 percent interest, compounded annually. 
• B) A perpetuity comprised of $100 monthly payments is worth more than an annuity of $100 monthly payments provided the discount rates are equal. 
• C) Most loans are a form of a perpetuity. 
• D) The present value of a perpetuity cannot be computed but the future value can. 
• E) Perpetuities are finite but annuities are not. 

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Definitions:

Dishonored

Refused; specifically, a payment that has been refused despite a holder presenting an instrument in a timely and proper manner.

Holder in Due Course

A legal term referring to a person who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defenses and claims that could be raised by prior parties.

Transfer Warranties

Guarantees provided by a seller to a buyer regarding the condition and legality of the item or property being transferred.

Endorsement

The act of signing one's name on the back of a financial instrument, such as a check, thereby transferring rights or title to another party.