What characterizes an annuity?

An annuity is characterized by a series of equal payments made at regular intervals. This definition highlights the key features of an annuity, which typically involves consistent cash flow over a specified period. Annuities can be used for various purposes, such as retirement funding, where individuals receive a set amount regularly, creating a reliable income stream. This regularity is fundamental, as it distinguishes annuities from other financial arrangements that may not feature equal or scheduled payments.

In contrast, the other options represent different financial concepts. An insurance policy for future payouts pertains to risk management and does not involve a structured series of equal payments. A one-time payment without repayment describes a lump sum transaction rather than an ongoing series required to classify as an annuity. Equity financing refers to raising capital through the sale of shares, which is unrelated to the periodic payment structure of an annuity. Thus, the defining characteristic of an annuity is the consistent, scheduled nature of its payments.