• Remember to explain all your steps and to show all formulas you use before you put

  numbers into the equations. o First, write the formula o Second, substitute the numbers into the formulao Third, say what is left to compute o Fourth, compute

Question 4 Consider a perpetuity that pays $100 per year. The market rate of interest is 10%. (4.1) What is the PV of the perpetuity? (4.2) What is the PV of the perpetuity three years from now? (4.3) What is the present value of the perpetuity n years from now? (4.4) Under what circumstances does the value of a perpetuity change