Which one of the following is an example of a perpetuity? Trust income of $1,200
ID: 2419998 • Letter: W
Question
Which one of the following is an example of a perpetuity?
Trust income of $1,200 a year forever
Retirement pay of $2,200 a month for 20 years
Lottery winnings of $1,000 a month for life
Car payment of $260 a month for 60 months
Apartment rent payment of $800 a month for one year
Trust income of $1,200 a year forever
Retirement pay of $2,200 a month for 20 years
Lottery winnings of $1,000 a month for life
Car payment of $260 a month for 60 months
Apartment rent payment of $800 a month for one year
Explanation / Answer
A constant stream of identical cash flows with no end is known as perpetuity. It is for a unlimited period of time.
So Correct answer is Trust income of $1,200 a year forever.As it is for forever.
Rest Options are not a example of perpetuity because they are for a limited period of time. Case of Lottery winnings of $1,000 a month for life is also not a example of perpetuity. Because as it is for a life & life is also for a limited period.
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