The Jones Brothers recently established a trust fund that will provide annual scholarships of $12,000 indefinitely. These annual scholarships are: an ordinary annuity. an annuity due. amortized payments. a perpetuity. a perpetuity due.

D. Perpetuity

Explanation:

Perpetuity is a type of annuity that has no end date. It is a fixed some of money paid every year to someone or for a purpose (in this case, scholarship) indefinitely. It is a form of annuity that lasts for ever.

The stream of cash flow continues indefinitely. It is usually calculated by dividing Cash flow by discount rate. That is

PV of Perpetuity = D/r

Where

D = Dividend

r = interest rate, and

PV = present value.

The major characteristics of perpetuity is that it doesn't have a fixed time span and continues indefinitely.

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