Question

If your investment pays the same amount at the beginning of each year for a period of 10 years, the cash flow stream is called:

A) a perpetuity.
B) an ordinary annuity.
C) an annuity due.
D) a growing perpetuity.

Answer 1

The cash flow stream that pays the same amount at the beginning of each year for a period of 10 years is called an ordinary annuity.

Step-by-step explanation:

The cash flow stream that pays the same amount at the beginning of each year for a period of 10 years is called an ordinary annuity.

In an ordinary annuity, the cash flows occur at the end of each period, which is the beginning of the next period. Each cash flow is the same amount, and the time between each cash flow is equal.

For example, if you receive $1,000 at the end of each year for 10 years, it is considered an ordinary annuity.