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Consider the following securities: (i) an annuity that pays $10,000 a year at the end of each of the next 10 years, (ii) a perpetuity
Consider the following securities: (i) an annuity that pays $10,000 a year at the end of each of the next 10 years, (ii) a perpetuity that pays $10,000 a year forever starting in 11 years i.e., after 10 years from today.
a. What are the values of these securities at an annual interest rate of 5%?
b. What are the values of these securities at an annual interest rate of 10%?
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