Question

A perpetuity has payments of 1, 2, 3, ...., 98, 99, 100, 99, 98, 97, 96,...

A perpetuity has payments of 1, 2, 3, ...., 98, 99, 100, 99, 98, 97, 96, ...., 3, 2, 1, 2, 3, 4, ...., 99, 100, 99, 98, ....., 3, 2, 1, 2, ...., 99, 100, 99, 98, ...., 3, ,2, 1.... If the payments are made annually, and the annual effective interest rate is 7%, Find the value of the perpetuity at the time of the first payment.

Please give detailed calculation process, Thank you!

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Answer #1

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Process

1. Write down cashflow in excel up to at least 4000 entries.

2. Do NPV of all those entries. using NPV formula in excel.

ANSWER: 217.86

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