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

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?

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a PV 110 10 b Since the perpetuity will be worth 10 in year 7 and since that is roughly ... View full answer

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