A Perpetuity Differs from an Annuity Because

question 47

Multiple Choice

A perpetuity differs from an annuity because:

• A)perpetuity payments vary with the rate of inflation.
• B)perpetuity payments vary with the market rate of interest.
• C)perpetuity payments are variable while annuity payments are constant.
• D)annuity payments never cease.
• E)perpetuity payments never cease.

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Definitions:

Estimated Life

The expected duration over which an asset is likely to be operational and useful.

Obsolescence

Obsolescence refers to the process or condition by which an object, service, or practice loses its value or utility due to aging, technological advancements, or changes in market preferences.

Present Value Factor

A factor used to calculate the present value of a future amount of money or stream of cash flows given a specific rate of return.

Desired Rate

A term that can refer to the ideal or target interest rate set by an individual or institution, often in the context of investing or borrowing.