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3. A government bond make a promise to pay $30,000 every year in perpetuity, growing at 2% rate every year after the first payment.
3. A government bond make a promise to pay $30,000 every year in perpetuity, growing at 2% rate every year after the first payment. Assume 8% discount rate. a. Calculate the present value of the perpetuity. b. Calculate the present value of the perpetuity if the first payment is made 10 years from today.
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a To calculate the present value of the perpetuity we can use the formula PV C r where PV is the pre...
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Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
132148234, 978-0132148238
