Explain whether the following statement is true or false: $100 a year for 10 years is an annuity; but $100 in Year 1, $200 in Year 2, and $400 in Years 3 through 10 does not constitute an annuity. However, the second series contains an annuity.
This statement would be true. The second series is an uneven cash flow stream, but it contains an annuity of $400 for eight years. The series could also be thought of as a $100 annuity for ten years plus an additional payment of $100 in Year two, plus additional payments of $300 in Years three through ten.