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11 July, 01:51

The Jones Brothers recently established a trust fund that will provide annual scholarships of $12,000 indefinitely. These annual scholarships are: an ordinary annuity. an annuity due. amortized payments. a perpetuity. a perpetuity due.

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  1. 11 July, 02:01
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    D. Perpetuity

    Explanation:

    Perpetuity is a type of annuity that has no end date. It is a fixed some of money paid every year to someone or for a purpose (in this case, scholarship) indefinitely. It is a form of annuity that lasts for ever.

    The stream of cash flow continues indefinitely. It is usually calculated by dividing Cash flow by discount rate. That is

    PV of Perpetuity = D/r

    Where

    D = Dividend

    r = interest rate, and

    PV = present value.

    The major characteristics of perpetuity is that it doesn't have a fixed time span and continues indefinitely.
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