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What is the maximum amount would pay

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Reference no: EM132532791

Perpetuities Suppose you have been offered an investment opportunity that will pay you $500 at the end of every year, starting 1 year
from now and continuing forever. Assume the relevant discount rate is 6%.

Question a. What is the maximum amount you would pay for this investment?

Question b. What would you pay if the first cash flow from this investment comes immediately, and the following cash payments of $500 after 1 year thereafter.

Question c. Suppose the first cash flow from this investment is 4 years from now; that is, the first payment will be made at the end of fourth year and will continue every year thereafter. How much is this worth to you today?

Reference no: EM132532791

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