A perpetuity immediate makes quarterly payments and earns 8% California nvertibl

Question

A perpetuity immediate makes quarterly payments and earns 8% California nvertible quarterly. The first payment is 10 and all subsequent payments are 2 more than the previous payment. Find the PV of the perpetuity. Please show by hand not by technology. A perpetuity immediate makes quarterly payments and earns 8% California nvertible quarterly. The first payment is 10 and all subsequent payments are 2 more than the previous payment. Find the PV of the perpetuity. Please show by hand not by technology.

Explanation / Answer

PV perpeuity of quarterly payments D1/(r-g) D1=10*1.02=10.2 r= 8%/4=2% or 0.02 g= 2%/4=0.5% 0r 0.005 PV   of quarterly perpetuity=10.2/(0.02-0.005)= 680 ANSWER:   680

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