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Assume you can either take a 20-year annuity that will first pay you $17,000 and increase by 2.4% each year, or a perpetuity that will
Assume you can either take a 20-year annuity that will first pay you $17,000 and increase by 2.4% each year, or a perpetuity that will pay you $15,500 the first year and increase by 2% each year. Assuming the interest rate of 11% and that the interest rate will compound annually, which one has a higher present value? Explain.
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