You have just signed off on a legal judgment that will pay you $5000 immediately, with this amount growing every year in perpetuity by 3% per year. If your discount rate is 9%, what lump-sum payment today would be economically equivalent to the growing perpetuity?
Answer to relevant QuestionsDescribe the behavior of securities prices in an efficient market. According to believers in the efficient markets hypothesis, what keeps securities prices efficient? Explain which "levels" of investing Charles Ellis recommends in his papers "Levels of the Game" and "The Winner's Game." Calculate the future value of $1000 invested for 3 years at an 8% annual rate of interest with monthly compounding. What is the present value of end-of-year cash flows of $2000 per year, with the first cash flow received three years from today and the last one 22 years from today? Use a discount rate of 8%. If you save $6000 a year into a 401(k) retirement plan for 25 years and earn an average rate of interest of 6% per year, how much will you have at the end of the 25th year? (Assume the first payment is made one year from ...
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