Which of the Following Is True About Perpetuities

question 10

Multiple Choice

Which of the following is true about perpetuities?

• A) All else equal, the present value of a perpetuity is higher when the periodic cash flow is higher.
• B) All else equal, the present 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:

Total Quantity Demanded

The sum of all individual quantities of a good or service demanded at a given price level within a specified period.

Public Good

A product that is non-excludable and non-rivalrous in consumption, meaning its use by one individual does not reduce its availability to others.

Excludability

A characteristic of a good or service that allows owners or producers to prevent others from using it without permission.

Marginal-cost-marginal-benefit Rule

A principle suggesting that optimal decision making involves continuing an activity until the additional benefits no longer exceed the additional costs.