Which of the following series of cash flows includes an imbedded annuity?
A) 10, 5, 6, 7, 8, 9, 10
B) 6, 6, 6, 6, 6, 6, 6
C) 5, 6, 7, 7, 7, 6, 7
D) 8, 7, 6, 5, 4, 3, 2
E) None of the above has an embedded annuity.

Question

Quizplus · Accepted Answer

A series of cash flows that includes an embedded annuity is one where there is a fixed amount of cash flows occurring at regular intervals. In option C, the cash flows of 7 occur three times in a row, which is indicative of an imbedded annuity. The other options do not have a consistent flow of cash flows at regular intervals.

Which of the Following Series of Cash Flows Includes an Imbedded