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Homework answers / question archive / Consider a growing perpetuity that will pay $100 in one year
Consider a growing perpetuity that will pay $100 in one year. Each year after that, you will receive a payment on the anniversary of the last payment that is 6% larger than the last payment. This pattern of payments will continue forever. If the interest rate is 11%, then the value of this perpetuity is:
Answer:
| First Payment | $100.00 | ||
| Growth Rate | 6.00% | ||
| Interest Rate | 11.00% | ||
| Value of perpetuity | $2,000.00 | =100/(11%-6%) |
