What is the pv of a perpetuity paying

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Reference no: EM131234020

1. From memory, write down the perpetuity formula. Be explicit on when the first cash flow occurs.

2. What is the PV of a perpetuity paying $5 each month, beginning next month, if the monthly interest rate is a constant 0.5%/month?

3. What is the PV of a perpetuity paying $15 each month, beginning next month, if the effective annual interest rate is a constant 12.68% per year?

4. Under what interest rates would you prefer a perpetuity that pays $2 million per year beginning next year to a one-time payment of $40 million.

Reference no: EM131234020

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