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are Perpetuities Suppose that today's date is January 1. You have the opportunity to make an investment that will pay you 5140 on January 1
are Perpetuities Suppose that today's date is January 1. You have the opportunity to make an investment that will pay you 5140 on January 1 of every year, starting in one year and continuing forever. Assume the relevant discount rate is 5% a. What would you pay now for this investment? b. Suppose the investment's first cash flow comes immediately, with subsequent cash payments every January 1 thereafter. Now how much would you pay it might be helpful to draw the first few years of a timeline here and compare it to the situation in part a. c. Suppose the investment's first cash flow is 3 years from now and on every January 1 thereafter you will receive $140. How much is this worth to you today? MW 111
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