Which one of these statements related to growing annuities and perpetuities is correct? In computing the present value of a growing annuity, you discount the cash flows using the growth rate as the discount rate. You can compute the present value of a growing annuity but not a growing perpetuity. The future value of an annuity will decrease if the growth rate is increased. An increase in the rate of growth will decrease the present value of an annuity. The present value of a growing perpetuity will decrease if the discount rate is increased.
Which one of these statements related to growing annuities and perpetuities is correct? In computing the present value of a growing annuity, you discount the cash flows using the growth rate as the discount rate. You can compute the present value of a growing annuity but not a growing perpetuity. The future value of an annuity will decrease if the growth rate is increased. An increase in the rate of growth will decrease the present value of an annuity. The present value of a growing perpetuity will decrease if the discount rate is increased.
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
Related questions
Question
Which one of these statements related to growing
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In computing the |
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You can compute the present value of a growing annuity but not a growing perpetuity. |
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An increase in the rate of growth will decrease the present value of an annuity. |
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The present value of a growing perpetuity will decrease if the discount rate is increased. |
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