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Suppose you receive a payment of $9,000 one year from now, but in year 2 the payment will have grown by 2.8% to $9,000 times
Suppose you receive a payment of $9,000 one year from now, but in year 2 the payment will have grown by 2.8% to $9,000 times (1 + 2.8/100), and in year 3 it will have grown by another 2.8%, so that you receive $9,000 times (1 + 2.8/100)^2, and so on into perpetuity. Note that this is compound growth, not linear. Given an interest rate 3.7%, what is the duration of these cash flows? (nearest 0.01 years) | |||
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