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

What is the name for an infinite stream of constant payments occurring at regular time intervals?

Ordinary Annuity

Annuity Due

Perpetuity

Sinking Fund

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Verified step by step guidance

Understand the concept of perpetuity: A perpetuity is an infinite stream of constant payments occurring at regular time intervals, with no end date. It is commonly used in financial accounting to value assets or liabilities that generate consistent cash flows indefinitely.

Differentiate between similar terms: Ordinary annuity refers to payments made at the end of each period for a fixed duration, while annuity due refers to payments made at the beginning of each period for a fixed duration. A sinking fund is a fund set aside to repay debt or replace an asset over time.

Recognize the key characteristic of perpetuity: Unlike ordinary annuities or annuities due, perpetuities do not have a fixed duration; they continue indefinitely.

Understand the formula for valuing perpetuities: The present value of a perpetuity can be calculated using the formula:

P = \frac{C}{r}

, where P is the present value, C is the constant payment, and r is the discount rate.

Apply the concept in financial accounting: Perpetuities are often used to value investments like preferred stocks or real estate properties that generate consistent cash flows indefinitely.