The interest rate is 10%.

a. What is the PV of an asset that pays $1 a year in perpetuity?

b....

Question

The interest rate is 10%.

a. What is the PV of an asset that pays $1 a year in perpetuity?

b. The value of an asset that appreciates at 10% per annum approximately doubles in seven years. What is the approximate PV of an asset that pays $1 a year in
 perpetuity beginning in year 8?

c. What is the approximate PV of an asset that pays $1 a year for each of the next seven years?
 d. A piece of land produces an income that grows by 5% per annum. If the first year's income is $10,000, what is the value of the land?

Robert · Accepted Answer

Question 
The interest rate is 10%. 
a. What is the PV of an asset that pays $1 a year in perpetuity? 
b. The value of an asset that appreciates at 10% per annum approximately doubles in seven years. What 
is the approximate PV of an asset that pays $1 a year in perpetuity beginning in year 8? 
c. What is the approximate PV of an asset that pays $1 a year for each of the next seven years? 
d. A piece of land produces an income that grows by 5% per annum. If the first year's income is $10,000, 
what is the value of the land?
Solution: 
The interest rate is 10%. 
a. What is the PV of an asset that pays $1 a year in perpetuity?

The interest rate is 10%. a. What is the PV of an asset that pays $1 a year in perpetuity? b. The value of an asset that appreciates at 10% per annum approximately doubles in seven years. What is the...

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