Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions.

Which of the following are characteristics of a perpetuity? Check all that apply.

The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows.

The value of a perpetuity cannot be determined.

A perpetuity is a stream of regularly timed, equal cash flows that continues forever.

A perpetuity is a stream of unequal cash flows.

A local banks advertising reads: Give us $15,000 today, and well pay you $600 every year forever. If you plan to live forever, what annual interest rate will you earn on your deposit?

4.00%

3.20%

5.60%

6.40%

Oops! When you went in to make your deposit, the bank representative said the amount of required deposit reported in the advertisement was incorrect and should have read $22,500. This revision, which will Reduce/increase? the interest rate earned on your deposited funds, will adjust your earned interest rate to be 3.07, 2.27, 2.54, 2.77?