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8 December, 20:40

Which of the following statements regarding perpetuities is FALSE? A. A perpetuity is a stream of equal cash flows that occurs at regular intervals and lasts forever. B. To find the value of a perpetuity by discounting one cash flow at a time would take forever. C. PV of a perpetuity = StartFraction r Over Upper C EndFraction D. One example of a perpetuity is the British government bond called a consol.

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  1. 8 December, 21:07
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    The answer is: C) PV of a perpetuity = StartFraction r Over Upper C EndFraction (I guess this means PV = r / C, which is FALSE)

    Explanation:

    The formula for calculating the present value of a perpetuity is:

    PV = C / r

    Where PV = Present Value, C = cash flow, r = discount rate.

    A perpetuity is a stream of equal cash flows that lasts forever (perpetually).

    The formula for calculating the present value of a perpetuity is simple, so there is no reason to spend time calculating the present value of each cash flow, since there are infinite cash flows.

    A consol bond s a type of perpetuity issued by the British government (also by the US government)
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Home » Business » Which of the following statements regarding perpetuities is FALSE? A. A perpetuity is a stream of equal cash flows that occurs at regular intervals and lasts forever. B.
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