Which of the Following Is True About Perpetuities

question 20

Multiple Choice

Which of the following is true about perpetuities?

• A) Since a perpetuity generates cash flows every period infinitely, the cash flow generated equals the PV times the interest rate.
• B) Since a perpetuity generates cash flows every period infinitely, each cash flow must be discounted to calculate the present value.
• C) Since a perpetuity generates cash flows every period infinitely, there is no way to solve for the cash flow given the present value and the interest rate.
• D) A perpetuity does not generate cash flows every period infinitely.
• E) Since a perpetuity generate cash flows every period infinitely, the cash flow generated equals the PV divided by the interest rate.

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Definitions:

Milgram's Studies

A series of social psychology experiments conducted by Stanley Milgram, which measured the willingness of study participants to obey an authority figure who instructed them to perform acts conflicting with their personal conscience.

Obedience

The act of following orders or instructions, often from an authority figure, without questioning.

Ethical Controls

Measures or guidelines put in place to ensure behavior and practices conform to ethical standards and principles.

Referent Informational Influence

Pressure to conform to a group norm that defines oneself as a group member.