Which of the following statements best describes annuities?
A) The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.
B) If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity.
C) The cash flows for an annuity due must all occur at the ends 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.

Question

Quizplus · Accepted Answer

An annuity is a series of equal cash flows that occur at regular intervals, such as once a year or once a month. The cash flows can occur at either the beginning (ordinary annuity) or end (annuity due) of each period. Therefore, statement A and C are incorrect. Statement B is also incorrect because the cash flows must be equal to be considered an annuity.

Which of the Following Statements Best Describes Annuities