Question
An asset is expected to pay a cash flow of $2,000 every five years in perpetuity with the first cash flow occurring in exactly 2
An asset is expected to pay a cash flow of $2,000 every five years in perpetuity
with the first cash flow occurring in exactly 2 years (i.e., 1st cash flow in 2 years,
2nd cash flow in 7 years, 3rd cash flow in 12 years, and so on). Similar investment
opportunities have a required return of 10% p.a. compounded annually. What is
the current fair value of this asset closest to?
HINT: find the effective 5-year rate first, use the perpetuity formula, and then either
discount/compound to obtain today's PV.
An asset is expected to pay a cash flow of $2,000 every five years in perpetuity
with the first cash flow occurring in exactly 2 years (i.e., 1st cash flow in 2 years,
2nd cash flow in 7 years, 3rd cash flow in 12 years, and so on). Similar investment
opportunities have a required return of 10% p.a. compounded annually. What is
the current fair value of this asset closest to?
HINT: find the effective 5-year rate first, use the perpetuity formula, and then either
discount/compound to obtain today's PV.
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Financial Mathematics
Authors: Cacildo Marques
1st Edition
8741574710, 979-8741574713
