Business, 26.11.2019 23:31 chrisayy

Perpetuities suppose that today's date is january 1,2019. you have the opportunity to make an investment that will pay you $100 on january 1 of every year, starting in 2020 and continuing forever.

assume the relevant discount rate is 7%.

a. what would you pay now for this investment?

b. suppose the investment's first cash flow comes immediately, on january 1,2019, p5-27 with subsequent cash payments every january 1 thereafter. now how much would you pay? it might be to draw the first few years of a timeline here and compare it to the situation in part a.

c. suppose the investment's first cash flow is 3 years from now, on january 1, 2022. on every january 1 thereafter you will receive $100. how much is this worth to you today, january 1, 2019?

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Perpetuities suppose that today's date is january 1,2019. you have the opportunity to make an invest...