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Exercise 4 (13 points): Theoretical question (150 words maximum) Explain with your own words (no textbook definitions needed) what is annuity? Give 2-3 examples from

Exercise 4 (13 points): Theoretical question (150 words maximum)

Explain with your own words (no textbook definitions needed) what is annuity? Give 2-3 examples from finance where we can use annuity formula for the valuation of cash flows.

Exercise 5* (7 points):

Using the concept of geometric series, derive the formula of present value of perpetuity.

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