Which of the following statements is CORRECT?
a. If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity.
b. The cash flows for an annuity due must all occur at the ends of the periods.
c. The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.
d. The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month. If some cash flows occur at the beginning of the periods while others occur at the ends, then we have what the textbook defines as a variable annuity.

Question

14-11-2019
Business

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Which of the following statements is CORRECT?
a. If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity.
b. The cash flows for an annuity due must all occur at the ends of the periods.
c. The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.
d. The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month. If some cash flows occur at the beginning of the periods while others occur at the ends, then we have what the textbook defines as a variable annuity.

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Shakiru Shakiru · Answer 1 · 2019-11-14T10:38:36+01:00

Answer:D. The cash flows for an annuity must all be equal and they must occur at regular intervals, such as once a year or month . If some cash flows occurred at the beginning of the periods while others occurred at the ends, then we have what the text books defined as variable cash flow.

Explanation:

An annuity is a fixed amount of cash inflow or outflow receivable or payable periodically over a period of time. When the cash flows periods varies it's usually that it has a definite receipt period and the payment period is subject to the end of the receipt period e.g a pension scheme that is payed during work life but can only be received after retirement.