Investment X is an example of a_________ cash flow and Investment Y is an example of ________ cash flow [table]
Year | Investment X | Investment Y
1 | $5 000 | $5 000 2 | $7 000 | $5 000 3 | $9 000 | $5 000 4 | $11 000 | $5 000
[/table]

Question

BlackTom AI · Accepted Answer

In this problem, we’re asked to classify the cash flows of two investments based on how the amounts change over time.
First, look at Investment X: Yearly cash flows are 5,000; 7,000; 9,000; 11,000. Each year the amount is larger than the previous year, so the cash flow amounts are not the same across years. This makes Investment X an unequal cash flow.
Next, examine Investment Y: Yearly cash flows are 5,000 each year (years 1–4). Because the payments are identical in every period, this is a classic example of an annuity, which is a level (equal) cash flow stream.
Now, consider why the other possible pairings would be incorrect if presented as options. If someone labeled X as an equal cash flow, they would be ignoring the growing increments (5k → 7k → 9k → 11k), which clearly contradicts the definition of an equal cash flow. If someone claimed Y was a nonlevel or unequal cash flow, they would be overlooking the steady 5,000-per-year pattern, which is precisely the hallmark of an annuity. If an option suggested X was an annuity, that would also be wrong since an annuity requires equal payments, not the increasing sequence seen here. Finally, any option that assigns both X and Y to the same category would be incorrect because one is unequal and the other is equal, as established.
Putting it succinctly: Investment X corresponds to an unequal cash flow, and Investment Y corresponds to an annuity, matching the provided answer choice that reads as "Unequal cash flow; Annuity."

Investment X is an example of a_ cash flow and Investment Y is an example of cash flow [table] Year | Investment X | Investment Y 1 | $5 000 | $5 000 2 | $7 000 | $5 000 3 | $9 000 | $5 000 4 | $11 000 | $5 000 [/table]

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