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Consider an increasing perpetuity with the first payment equaling $1 and each successive payment increased by $1. The present value (price function) of this annuity
Consider an increasing perpetuity with the first payment equaling $1 and each successive payment increased by $1. The present value (price function) of this annuity at interest rate i is .P(i)= 10/i+10/i^2
Using a yield rate of i=9% and using the modified (tangent line) approximation, approximate the price at a yield rate of 9.4%. Note: calculating the exact price will lead to an incorrect answer.
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