Question

In: Finance

TJ is buying a truck and he will finance it with a loan from the dealer...

TJ is buying a truck and he will finance it with a loan from the dealer that requires monthly payments of $356 for the next 60 months. His loan payments are described by which one of the following terms?

Group of answer choices

A-Perpetuity

B-Present value

C-Future value

D-Annuity

Lump sum

Solutions

Expert Solution

Correct: Annuity

  • Perpetuity: It is an annuity cash flow that lasts forever.
  • Present value: It is the value of future cash flows discounted at a required rate of return.
  • Future value: It is the value of the present value of cash flow at a future point of time based on a required rate of return.
  • Annuity: It means an equal amount of cash flow occurring at fixed intervals for a specified period of time.
    • The cash flow given in the question occurs every month for 60 months.
  • Lumpsum: It is a single cash flow occurring at a point of time.

jeff jeffy answered 2 years ago
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