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 of the following is true about perpetuities?

Perpetuities are only used to value stocks with growing dividends.

A perpetuity has a fixed maturity date.

The present value of a perpetuity is calculated using the formula $PV = FV \times (1 + r)^n$.

A perpetuity pays a fixed amount at regular intervals forever.

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Verified step by step guidance

Understand the concept of a perpetuity: A perpetuity is a financial instrument that pays a fixed amount at regular intervals indefinitely, meaning it has no end date.

Clarify the incorrect options: Perpetuities are not limited to valuing stocks with growing dividends; they can be used in various financial contexts. Additionally, a perpetuity does not have a fixed maturity date, as it continues forever.

Analyze the formula provided: The formula $PV = FV \times (1 + r)^n$ is incorrect for perpetuities. This formula is used for calculating the future value of a lump sum or an annuity, not for perpetuities.

Learn the correct formula for the present value of a perpetuity: The present value of a perpetuity is calculated using the formula $PV = \frac{C}{r}$, where $C$ is the fixed payment amount, and $r$ is the discount rate.

Conclude with the correct statement: The correct answer is that a perpetuity pays a fixed amount at regular intervals forever, which aligns with the definition of a perpetuity.