Compute the value of a perpetuity using the summation formula. In the function below, use a for loop to estimate the value of a perpetuity, approximated to N periods. def summation_formula(C,r,N):
PYTHON
A perpetuity pays a coupon value of C each and every period forever. Given a discount rate of r, the value of a perpetuity is given by V=∑t=1∞C(1+r)t
Compute the value of a perpetuity using the summation formula. In the function below, use a for loop to estimate the value of a perpetuity, approximated to N periods.
def summation_formula(C,r,N):
perpetuity:
In the financial system, perpetuity refers to a scenario in which a stream of cash flow payments continues eternally or is an annuity with no end date. Perpetuities are used in valuation research to determine the present value of a company's future expected cash flow stream and its terminal value. A perpetuity is essentially a sequence of cash flows that continue to pay out indefinitely.
The perpetuity value formula is the present value formula for the future cash flows received per period.
present value of perpetuity=
The price of perpetuity is also written as follow
present value of perpetuity=
The current scenario here is to write the python program to calculate the value of perpetuity to N periods using the summation formula by defining the function summation_formula() with 3 arguments c, n, r.
Where c= coupon per period
r= discount rate
n= number of periods
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