Which of the Following Is True About Perpetuities

question 55

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

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Definitions:

Expected Value

The weighted average of all possible values of a random variable, representing its mean or center.

Variance

A statistical measurement that describes the spread of numbers in a data set, calculated as the average of squared deviations from the mean.

Probability

A numerical range from 0 to 1 signifying the chances that an event will happen.

Psychiatrist's Theory

A hypothesis or set of hypotheses proposed by a psychiatrist that attempts to explain behavioral, psychological, or mental disorders.