PRESENT VALUE OF A PERPETUITY

Question 1

perpetuity (a perpetual annuity).

Answer 1

ordinary annuity that extends indefinitely

Question 2

perpetuity

Answer 2

PV = A/r (valid only for a perpetuity with identical payments)

Question 3

A stock paying constant dividends is similar to

Answer 3

a perpetuity

Question 4

Recall that a perpetuity or an ordinary annuity
has its first payment

Answer 4

one period away,

Question 5

we can construct an annuity as the difference between two perpetuities with equal,
level payments but differing starting dates

Answer 5

differing starting dates