Multiple Choice
Which equation best represents the future value of a single sum after \(n\) periods, assuming no compounding interest (i.e., using simple interest)?
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10. Time Value of Money
Time Value of Money Equations
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
A perpetuity is defined as:
A
A series of equal payments made at regular intervals for a fixed period.
B
A series of increasing payments made at regular intervals for a fixed period.
C
A series of equal payments made at regular intervals that continue indefinitely.
D
A single payment made at a future date.
Verified step by step guidance1
Understand the concept of a perpetuity: A perpetuity is a type of annuity where equal payments are made at regular intervals and continue indefinitely, without an end date.
Recognize the key characteristics of a perpetuity: Payments are equal in amount, occur at consistent intervals, and do not have a termination point.
Compare the options provided in the problem: Evaluate each statement to determine which aligns with the definition of a perpetuity.
Eliminate incorrect options: For example, a perpetuity does not involve increasing payments, fixed periods, or single payments made at a future date.
Select the correct answer: Based on the definition, the correct answer is 'A series of equal payments made at regular intervals that continue indefinitely.'
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