At the beginning of the year, William bought 20 shares of Zync Corporation at $18.50 per share. Zync pays dividend at the end of each year based on annual profits, which generally vary substantially from year to year. In its 25 years history, Zync has paid dividends every year without fail. The initial investment by William and the receipt of dividend at the end of every year are examples of a(n) _____ and a(n) _____, respectively.
A)uneven cash flow stream; annuity due
B)uneven cash flow stream; ordinary annuity
C)lump-sum payment; annuity due
D)lump-sum payment; uneven cash flow stream
E)lump-sum payment; ordinary annuity

Question

At the beginning of the year, William bought 20 shares of Zync Corporation at $18.50 per share. Zync pays dividend at the end of each year based on annual profits, which generally vary substantially from year to year. In its 25 years history, Zync has paid dividends every year without fail. The initial investment by William and the receipt of dividend at the end of every year are examples of a(n) _____ and a(n) _____, respectively. 
A)uneven cash flow stream; annuity due
B)uneven cash flow stream; ordinary annuity
C)lump-sum payment; annuity due
D)lump-sum payment; uneven cash flow stream
E)lump-sum payment; ordinary annuity

Quizplus · Accepted Answer

The initial investment is a lump-sum payment, and the dividends, which vary each year, represent an uneven cash flow stream.

At the Beginning of the Year, William Bought 20 Shares