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Basic Question 23 of 27
You expect to receive annual payments of $425 per year forever. If these payments can be invested at the rate of 11% per year, what is the present value of this perpetuity?
User Contributed Comments 4
| User | Comment |
|---|---|
| Ratego | PV=A/r A=425 r=.11 |
| 8thlegend | After going through 11 of these problems, I wished that all the CFA questions were like these. |
| Yrazzaq88 | BA calculator: PMT = -425 I/Y = 11% N = 100 =3863.52 |
| assiduous | Another way to look at it.... Suppose you were living off of interest. If your money was invested at an annual rate of 11%, how much money would you need TODAY in order to yield $425 every year forever? The answer is always: [desired amt per period] / [rate of return per period] |
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Learning Outcome Statements
calculate and interpret the present value(PV) of fixed-income and equity instruments based on expected future cash flows
calculate and interpret the implied return of fixed-income instruments and required return and implied growth of equity instruments given the present value (PV) and cash flows
CFA® 2024 Level I Curriculum, Volume 1, Module 2.