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Perpetuities are annuities that continue paying forever. This feature makes perpetuities distinct from regular annuities, which have a finite duration.
Recall the present value of an annuity formula:
PV=PMT[(1−(1+i)^(−n))/i]
Q1. Find the present value of a perpetuity that pays $10 at the end of each year, assuming i=10%.
Q2. What is the present value of a perpetuity that pays $250 per month, with the first payment 3 years from today? Assume i^((1))=11%.
3 авг 2024