Ch 3 - Understanding the different behaviours of cashflows

Question 1

What is a perpetuity?

Answer 1

A constant CF is received to infinity

Question 2

What is a perpetuity due?

Answer 2

A constant CF is occurred to infinity starting from year 0

Question 3

What is a deferred/ delayed perpetuity?

Answer 3

A constant CF is received to infinity with a delay

Question 4

What is a perpetual CF with growth?

Answer 4

A constant CF grows at a constant rate into infinity

Question 5

What is an annuty?

Answer 5

A constant CF occurs for a finite no of periods

Question 6

What is an annuity due?

Answer 6

A constant CF occurs for a finite period of time at the beginning of each year (rather than at the end). Hence there’s a CF at time Yo

Question 7

What us a deferred perpetuity?

Answer 7

A constant CF occurs for a finite period of time with a delay

Question 8

What is an annuity with growth?

Answer 8

A constant CF occurs for a certain number of periods where CF grows at a proportionate rate