Which of the following statements is CORRECT?
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 beginning of the periods.
D) The cash flows for an annuity may vary from period to period, but they must occur at regular intervals, such as once a year or once a month.

Question

Quizplus · Accepted Answer

An annuity due requires that all cash flows occur at the beginning of the periods, while an ordinary annuity has cash flows occurring at the end of the periods. Option A is incorrect as it describes an ordinary annuity, not a deferred one. Option B is incorrect as not all series of cash flows at regular intervals are annuities - annuities involve equal cash flows. Option D is incorrect as annuities have equal cash flows occurring at regular intervals.

Which of the Following Statements Is CORRECT