Present value of a deferred growing perpetuity
An instrument makes its first payment of $60 two years from now (at ), and every subsequent annual payment grows 3% forever. At an 8% discount rate, what is its present value today? (in dollars, to 2 decimals)
Show hints (2)+
- gives the value at (one year before the first $60 at ).
- Then discount that value back one more year: ÷ 1.08.
Answer
Reveal answer →Final answer
1111.11 (± 0.1)
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Asked at: Game-Based Aptitude, Options Market-Making