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Annuity: Series of equal cash flows occurring at evenly spaced interval

Ordinary Annuity: Cash flow at end-of-time period

Annuity Due: Cash flow at beginning-of-time period


PV of Annuity Due = PV of Ordinary Annuity * (1 + r)

Perpetuities: annuities with an infinite life PVperpetuity = PMT / discount rate


Q: What is the worth of perpetuity paying $100 annually at an interest rate of 10%?

PVPerpetuity = A/r
= $100/0.1
= $1,000



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