Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

Which one of the following is an ordinary annuity, but not a perpetuity?

A single lump-sum payment made after 5 years

A series of equal payments made at the end of each year forever

A series of equal payments made at the beginning of each year forever

A series of equal payments made at the end of each year for 10 years

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Verified step by step guidance

Step 1: Understand the definitions of key terms. An ordinary annuity is a series of equal payments made at regular intervals, typically at the end of each period, for a specified number of periods. A perpetuity, on the other hand, is a series of equal payments made at regular intervals that continue indefinitely.

Step 2: Analyze the options provided in the problem. The first option describes a single lump-sum payment, which does not qualify as an annuity or perpetuity. The second and third options describe payments that continue forever, which are characteristics of a perpetuity.

Step 3: Focus on the fourth option: 'A series of equal payments made at the end of each year for 10 years.' This matches the definition of an ordinary annuity because the payments are equal, occur at regular intervals (end of each year), and are limited to a specific time frame (10 years).

Step 4: Compare the characteristics of the fourth option to the definitions of an ordinary annuity and a perpetuity. Since the payments do not continue indefinitely, it cannot be a perpetuity. However, it fits the criteria for an ordinary annuity.

Step 5: Conclude that the correct answer is the fourth option, as it represents an ordinary annuity with a finite duration of 10 years.