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2. In the notes for class 5, we discussed the idea of a perpetuity, which is a bond that never matures. The formula for a
2. In the notes for class 5, we discussed the idea of a perpetuity, which is a bond that never matures. The formula for a perpetuity is P = + C + C + + (1 + i) (1 + i) (1 + i) (1 + i)N which is an infinite series. This can be reduced to the following simple equation for the yield to maturity: i = C/P or P = C/i. Show that the equation for a perpetuity can be reduced to P=C/i. HINTS: You can take a C out of each of the terms in the equation above. You can solve for an infinite series by plugging the series back into itself
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