Which statement 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 the beginning or end of each period, depending on whether it is an ordinary (at the end) or an annuity due (at the beginning). Unequal cash flows at regular intervals do not qualify as an annuity.

Which Statement Best Describes Annuities