55. a) You pay $300 today. Thereafter, 1 year from today, youll begin to receive a perpetuity. The first perpetuity payment will be $9.00. Subsequent perpetuity payments will decline each year by 1% per year. After drawing the CF timeline, can you determine the IRR in your head in under 5 seconds? Once you have an answer, use algebra to confirm that you were correct (i.e. write down the NPV = 0 equation, and solve for r). If you did that correctly, then you should have an equation of the form r = A/P + g (which I said comes in handy earlier). Enter the IRR as a percent, not as a decimal.

b)Using your answer for the IRR for Part E, do you believe that the simple sum of the inflows associated with the perpetuity is:

c)You pay $1000 for a newly issued bond today (i.e. you loan someone $1000 today). In return, as the owner of the bond you receive $123 at 1, 2, 3, 4, and 5 years from today. In addition, you also receive $1000 at the end of the 5^th year.

d) Using no algebra (just timeline pattern recognition as discussed in the book), what is the effective annualized IRR of the bond?. Enter the IRR as a percent, not as a decimal, with at least 4 significant digits.