An ordinary annuity is best defined as:

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Question restatement: An ordinary annuity is best defined as a description of payments over time in a standard financial sense.

Option 1: 'increasing payments paid for a definitive period of time.' This describes payments that grow over time, which is not what an ordinary annuity entails. An ordinary annuity uses equal payments, not increasing ones.

Option 2: 'equal payments paid at the beginning of regular intervals for a limited time period.' Payments at the beginning of each period describe an annuity due (or possibly a due-based schedule), not an ordinary annuity. The ordinary annuity specifies end-of-period timing, not beginning-of-period timing.

Option 3: 'equal payments paid at the end of regular intervals over a stated time period.' This matches the standard definition of an ordinary annuity: fixed payments, identical amount each period, paid at the end of each regular interval, for a specified number of periods.

Option 4: 'equal payments that occur at set intervals for an unlimited period of time.' Payments that continue indefinitely describe a perpetuity, not an ordinary annuity, which has a finite, stated time horizon.

Option 5: 'increasing payments paid forever.' This combines the ideas of increasing payments with an unlimited time span, which does not align with the ordinary annuity structure of equal payments over a finite term.

Summary of conceptual distinctions: The key features of an ordinary annuity are equal payment amounts, end-of-period payment timing, and a finite, stated number of periods. Deviations involve payment timing (beginning vs end), payment amounts (equal vs increasing), and time horizon (finite vs indefinite).

BUSFIN 3220 AU2025 (2110) Exam 1 - Requires Respondus LockDown Browser

An ordinary annuity is best defined as:

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