MATH 102: HOMEWORK 4 DUE DATE: THURSDAY, OCT 24 Note that you need to turn in LATEXversion of this homework. Do Problem 1 below AND the problems from the book Problem 1. In class on Oct 8, we discussed about inflation and present value. In short, if someone gives you F amount of dollars every year and the inflation rate is r, then the present value of N year of this fixed income would be PV=F+ F 1+r F + + (1+r) N (1) Use induction to prove that after N year, 1+r PV=F (1+ r (2) Apply this to the situation when F = $1 and r = 5% (I made a mistake in class about this) (3) What happen if you were to live forever? How much would you buy a stock if it pays you $1 per year from now to eternity?
MATH 102: HOMEWORK 4 DUE DATE: THURSDAY, OCT 24 Note that you need to turn in LATEXversion of this homework. Do Problem 1 below AND the problems from the book Problem 1. In class on Oct 8, we discussed about inflation and present value. In short, if someone gives you F amount of dollars every year and the inflation rate is r, then the present value of N year of this fixed income would be PV=F+ F 1+r F + + (1+r) N (1) Use induction to prove that after N year, 1+r PV=F (1+ r (2) Apply this to the situation when F = $1 and r = 5% (I made a mistake in class about this) (3) What happen if you were to live forever? How much would you buy a stock if it pays you $1 per year from now to eternity?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:MATH 102: HOMEWORK 4
DUE DATE: THURSDAY, OCT 24
Note that you need to turn in LATEXversion of this homework.
Do Problem 1 below AND the problems from the book
Problem 1. In class on Oct 8, we discussed about inflation and present
value. In short, if someone gives you F amount of dollars every year
and the inflation rate is r, then the present value of N year of this fixed
income would be
PV=F+
F
1+r
F
+ +
(1+r) N
(1) Use induction to prove that after N year,
1+r
PV=F
(1+
r
(2) Apply this to the situation when F = $1 and r = 5% (I made a
mistake in class about this)
(3) What happen if you were to live forever? How much would you
buy a stock if it pays you $1 per year from now to eternity?
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