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1) How much would you be willing to pay for an infinite stream of annual payments of 14 at the end of each year, forever,
1) How much would you be willing to pay for an infinite stream of annual payments of 14 at the end of each year, forever, if the effective annual rate of interest is 3.9%.
a) 364 b) 349 c)345 d)355 e)359
b) Consider a perpetuity-due that pays 1 at the beginning of every year, forever. The effective annual rate of interest is i. Which one of the following formulas DOESN'T give the PV of this perpetuity?
a) PV = 1/i b) PV=1/d c)PV = 1+v+v^2+v^3+..... d) PV=(1+i)/i e) PV=1+1/i
Please show all works including formulas. Thank you for helping!
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