Select all the statements on perpetuities that are correct. a. The present value of a perpetuity increases if the interest rate increases. b. If I multiply the present value of a perpetuity with the interest rate then I get the value of a single payment of the cashflow stream. c. The present value value of a perpetuity is independent of the interest rate. d. The present value of a perpetuity is infinite as all the payments add up to infinity. e. A perpetuity describes a constant cashflow at the end of each year that continues infinitely long.

Select all the statements on perpetuities that are correct. a. The present value of a perpetuity increases if the interest rate increases. b. If I multiply the present value of a perpetuity with the interest rate then I get the value of a single payment of the cashflow stream. c. The present value value of a perpetuity is independent of the interest rate. d. The present value of a perpetuity is infinite as all the payments add up to infinity. e. A perpetuity describes a constant cashflow at the end of each year that continues infinitely long.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11QTD

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Tick all those statements on perpetuities that are correct. a. The present value of a perpetuity increases if the interest rate increases. b. If I multiply the present value of a perpetuity with the interest rate then I get the value of a single payment of the cashflow stream. c. A perpetuity describes a constant cashflow at the end of each year that continues infinitely long. d. The present value of a perpetuity is infinite as all the payments add up to infinity. e. The present value value of a perpetuity is independent of the interest rate.
Using an annuity, you may calculate the present value of a single payment or a series of payments you will receive. Is this statement correct or incorrect?
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An annuity is a method for calculating the future value of a single payment or a series of payments. What do you think?
6. Perpetuities Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. A perpetuity is a stream of unequal cash flows. The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows. A perpetuity is a stream of regularly timed, equal cash flows that continues forever. The value of a perpetuity cannot be determined. A local bank’s advertising reads: “Give us $45,000 today, and we’ll pay you $800 every year forever.” If you plan to live forever, what annual interest rate will you earn on your deposit? 1.42% 2.85% 2.49% 1.78% Oops! When you went in to make your deposit, the bank representative said the amount of…
Calculate the future value of an annuity, with case A being an ordinary annuity and case B being an annuity due. SEE PIC for NUMBER DETAILS
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