What is the present value of a series of payments received each year forever, starting with $500 paid one year from now and the payment growing in each subsequent year by 3%? Assume a discount rate of 4%. Equivalently: What amount would you have to invest today at an interest rate of 4% to generate an annual payment forever, starting with $500 and the payment growing in each subsequent year by 3%?

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To calculate the present value of a perpetuity with a growing payment we ... View the full answer