When Calculating the Present Value of an Ordinary Annuity, It

question 67

Multiple Choice

When calculating the present value of an ordinary annuity, it is assumed that:

• A) cash flows will be reinvested at the required rate of return.
• B) cash flows are withdrawn at the end of each year.
• C) the investor will wait until the end of the investment period to withdraw cash flows.
• D) Both cash flows will be reinvested at the required rate of return and cash flows are withdrawn at the end of each year are correct.

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