Which of the following statements regarding annuities is FALSE? (1) A difference between an annuity and a perpetuity is that an annuity ends after some fixed number of payments. (II) When using the present value formula of perpetuity (C/r) to calculate the value at date 0, the first payment occurs at date 0. (III) When using the present value formula of growing perpetuity (C/(r-g)) to calculate the value at date 0, the first payment occurs at date 1 and doesn't include growth. (IV) In the growing perpetuity formula (C/(r-g)), g cannot be negative. (V) In the growing perpetuity formula (C/(r-g)), g can be greater than r. O A. II, III, IV, V O B. II O C. IV, V O D. II, IV, V O E. II, IV
Which of the following statements regarding annuities is FALSE? (1) A difference between an annuity and a perpetuity is that an annuity ends after some fixed number of payments. (II) When using the present value formula of perpetuity (C/r) to calculate the value at date 0, the first payment occurs at date 0. (III) When using the present value formula of growing perpetuity (C/(r-g)) to calculate the value at date 0, the first payment occurs at date 1 and doesn't include growth. (IV) In the growing perpetuity formula (C/(r-g)), g cannot be negative. (V) In the growing perpetuity formula (C/(r-g)), g can be greater than r. O A. II, III, IV, V O B. II O C. IV, V O D. II, IV, V O E. II, IV
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Which of the following statements regarding annuities is FALSE?
(1) A difference between an annuity and a perpetuity is that an annuity ends after some fixed number of payments.
(II) When using the present value formula of perpetuity (C/r) to calculate the value at date 0, the first payment occurs at date 0.
(III) When using the present value formula of growing perpetuity (C/(r-g)) to calculate the value at date 0, the first payment occurs at date 1 and
doesn't include growth.
(IV) In the growing perpetuity formula (C/(r-g)), g cannot be negative.
(V) In the growing perpetuity formula (C/(r-g)), g can be greater than r.
O A. II, III, IV, V
O B. II
O C. IV, V
O D. II, IV, V
O E. II, IV
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