Present value of perpetuity that pays annual cash flow

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Reference no: EM132028599

1. If the APR is 4% and the compounding period is monthly, what is the EAR?

2. Would you prefer $1000 today or $2000 in 5 years?

a. If the prevailing interest rate is 9%

b. If the prevailing interest rate is 18%

3. What is the present value of a perpetuity that pays an annual cash flow of $150 with prevailing interest rates of 5%?

4. What is the present value of a perpetuity that pays its first cash flow of $500 one year from now and then grows by 3% per year. Assume prevailing interest rates of 6%?

Reference no: EM132028599

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