A Perpetuity Will Pay You $100 Starting Next Year and Continuing

question 33

Essay

A perpetuity will pay you $100 starting next year and continuing at that level forever.The appropriate discount rate for the perpetuity is 10%.Calculate the present value of (1)the infinite stream of payments,i.e.,the entire perpetuity,and (2)the first 20 payments.Compare these two present values and comment on what they can tell you about the present value of the perpetuity's payments in the very distant future (i.e.,payments made later than 20 years in the future).

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Definitions:

Child's Creativity

The natural ability of children to use their imagination and inventiveness to create something new or original.

Guiding Methods

Techniques or strategies used to direct or influence the behavior or learning process of others.

Preoperational Characteristic

A stage in Piaget's theory of cognitive development where children from ages 2 to 7 engage in symbolic play and struggle with logic and taking the perspective of others.

Egocentrism

The inability to distinguish between one’s own perspective and someone else’s, often seen in early childhood development.