A perpetuity is distinguished from other bonds in that it
A)pays continuously compounded interest.
B)pays interest only when it matures.
C)never matures.
D)will be used to purchase another bond when it matures unless the owner specifies otherwise.

Question

Quizplus · Accepted Answer

A perpetuity never matures and pays a fixed payment at regular intervals indefinitely, distinguishing it from other bonds that have a set maturity date and can have varying interest payment schedules. Option A is incorrect because not all perpetuities pay continuously compounded interest, and option B is incorrect because a perpetuity does not have a maturity date for interest payments to be made upon. Option D is unrelated to the definition of a perpetuity.

A Perpetuity Is Distinguished from Other Bonds in That It