Chapter 5, Problem 2Q

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Chapter
Section

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

# Explain whether the following statement is true or false: \$100 a year for 10 years is an annuity; but 5100 in Year 1, \$200 in Year 2, and \$400 in Years 3 through 10 does not constitute an annuity. However, the second series contains an annuity.

Summary Introduction

To indicate: The given statement is true or false.

Introduction:

Annuity: An annuity refers to the fixed cash flows that are received or paid by a person at defined intervals. This series of cash flows occur for a given time period. The two kinds of annuities are the annuities having a fixed rate and annuities having a variable rate.

Explanation
• The annuity refers to the receiving or payment of a certain amount at fixed regular intervals which is decided for a given time period and for the given rate of interest...

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