An annuity is a level stream of equal payments through time. Option A is incorrect as an annuity pays interest. Option B is incorrect as an annuity provides fixed payments, not varying payments. Option D is incorrect as an annuity has value as it represents a series of future cash flows.

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An Annuity

Question 20

Multiple Choice

An annuity:

A) is a debt instrument that pays no interest.
B) is a stream of payments that varies with current market interest rates.
C) is a level stream of equal payments through time.
D) has no value.
E) None of these.

Correct Answer: