An ordinary annuity is best defined as:

Question

BlackTom AI · Accepted Answer

Question restatement: An ordinary annuity is best defined as:

Option 1: 'increasing payments paid for a finite period of time.' This describes payments that grow over time, which characterizes a graduated or increasing annuity rather than an ordinary annuity. An ordinary annuity features level payments, not escalating ones, so this option does not fit the standard definition.

Option 2: 'increasing payments paid forever.' Here the payments are both increasing and perpetual. An ordinary annuity has finite horizons and fixed payment amounts, so this description is inconsistent with the conventional concept.

Option 3: 'equal payments paid at the end of regular intervals over a stated time period.' This aligns with the classic definition of an ordinary annuity: fixed (equal) payments made at the end of each period for a specified number of periods. The end-of-period timing distinguishes it from annuities due, and the fixed amount matches the term 'ordinary'.

Option 4: 'equal payments paid at the beginning of regular intervals for a limited time period.' Equal payments are correct, but the timing is wrong: payments at the beginning of each period define an annuity due, not an ordinary annuity. The phrasing specifies beginning-of-period payments, which makes this option incorrect for the ordinary annuity definition.

Option 5: 'equal payments that occur at set intervals for an unlimited period of time.' While the payments are equal and occur at set intervals, the indefinite duration (unlimited period) contradicts the typical definition of an ordinary annuity, which has a fixed termination time. Therefore, this option is not accurate for an ordinary annuity.

In sum, the option that most closely matches the standard concept of an ordinary annuity is the one describing equal payments made at the end of regular intervals over a stated (finite) time period. The other options describe variations such as increasing payments, payments at the beginning of periods, or indefinite durations, which are not characteristics of an ordinary annuity.

An ordinary annuity is best defined as:Single choice

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An ordinary annuity is best defined as:

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