BUISENESS MANAGEMENT
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Regular equal monthly rent payments
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Equal annual deposits into a retirement account
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The $50 of gasoline you put into your car every two weeks on pay day
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All of the examples above are annuity cash flows.
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Detailed explanation-1: -Option d-one-time cash flows, is not an example of an annuity. There must be multiple cash flows involved for a transaction to be characterized as an annuity.
Detailed explanation-2: -Definition of an Annuity An annuity is a series of equal cash flows, or payments, made at regular intervals (e.g., monthly or annually). The payments must be equal, and the interval between payments must be regular.
Detailed explanation-3: -Examples of Annuity Due Many monthly bills, such as rent, car payments, and cellphone payments, are annuities due because the beneficiary must pay at the beginning of the billing period. Insurance expenses are typically annuities due as the insurer requires payment at the start of each coverage period.