An annuity is a stream of payments made at regular intervals.

An annuity is a stream of payments made at regular intervals.

• A. A series of equal payments at regular intervals
• B. A single payment at the end of term
• C. A fluctuating payment schedule
• D. A perpetuity

Answer: (A)

The main idea here is the definition of an annuity: a series of payments made at regular intervals, with each payment typically of the same amount. That’s exactly what the option describes—the payments occur at consistent intervals and are equal in amount, which matches how annuities are usually structured (like a fixed monthly mortgage payment or a fixed yearly retirement payout). The other descriptions don’t fit as well. A single payment at the end isn’t a stream of payments at all, so it isn’t an annuity. A fluctuating payment schedule violates the idea of equal payments each period. A perpetuity is an ongoing stream with no end, which is a related concept, but a standard annuity is defined by a finite number of equal payments unless specifically stated otherwise.

The main idea here is the definition of an annuity: a series of payments made at regular intervals, with each payment typically of the same amount. That’s exactly what the option describes—the payments occur at consistent intervals and are equal in amount, which matches how annuities are usually structured (like a fixed monthly mortgage payment or a fixed yearly retirement payout).

The other descriptions don’t fit as well. A single payment at the end isn’t a stream of payments at all, so it isn’t an annuity. A fluctuating payment schedule violates the idea of equal payments each period. A perpetuity is an ongoing stream with no end, which is a related concept, but a standard annuity is defined by a finite number of equal payments unless specifically stated otherwise.