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You want to invest in a perpituity but are concerned with inflation. You decide to buy one where the payout is indexed to inflation. Your
You want to invest in a perpituity but are concerned with inflation. You decide to buy one where the payout is indexed to inflation. Your first payment will be $100 and you expect inflation to run at 3% a year. The long term rate of return on high quality corporate bond is 10%.
What is the most you would pay for this stream of cash flows?
$1,000
$1,430
$770
$3,333
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