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

When policy proceeds are received as a lump sum and then immediately invested, what type of financial arrangement is created?

Perpetuity

Annuity-immediate

Deferred annuity

Sinking fund

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Verified step by step guidance

Understand the key terms: Annuity-immediate refers to a financial arrangement where payments begin immediately after the initial investment, typically at the end of the first period. Deferred annuity involves payments starting after a delay, and a sinking fund is a fund set aside to repay debt or replace an asset over time.

Analyze the scenario: Policy proceeds are received as a lump sum and then immediately invested. This implies that the investment starts generating returns or payments right away, without any delay.

Compare the options: Perpetuity involves infinite payments, which is not mentioned in the problem. Deferred annuity involves a delay in payments, which does not align with the immediate investment described. Sinking fund is a fund for future obligations, not relevant to the immediate payment structure.

Focus on the correct option: Annuity-immediate matches the description of payments starting immediately after the lump sum is invested.

Conclude: Based on the analysis, the financial arrangement created when policy proceeds are received as a lump sum and immediately invested is an annuity-immediate.