Which statement best describes an annuity?

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Multiple Choice

Which statement best describes an annuity?

Explanation:
An annuity is a finite series of equal payments made at regular intervals. That puts the focus on a set number of payments that are all the same amount. If payments went on forever, it would be a perpetuity, not an annuity. If there were just a single payment, there’s no ongoing payment stream. If only interest is paid with no return of principal, that’s an interest-only arrangement, not an annuity. So the defining idea is a predetermined, finite sequence of equal payments.

An annuity is a finite series of equal payments made at regular intervals. That puts the focus on a set number of payments that are all the same amount. If payments went on forever, it would be a perpetuity, not an annuity. If there were just a single payment, there’s no ongoing payment stream. If only interest is paid with no return of principal, that’s an interest-only arrangement, not an annuity. So the defining idea is a predetermined, finite sequence of equal payments.

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