An annuity in which the periodic payment begin on a fixed date and continue forever is called
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Perpetuity
A perpetuity is an annuity whose payments begin on a fixed date and continue forever. Its present value is finite: a payment R per period at rate i per period is worth \(\frac{R}{i}\) today.
Why the other options are incorrect
Option (1) Sinking Fund — Incorrect. A sinking fund collects periodic deposits for a fixed period to meet a future expense; it does not run forever.
Option (3) Coupon payment — Incorrect. This is the periodic interest paid on a bond, and it stops when the bond matures.
Option (4) Bond — Incorrect. A bond is a debt instrument with a fixed maturity date, not an annuity that continues forever.
CBSE Applied Mathematics (Class XII):
Perpetuity
